Aecon reports year-end 2014 results - Increases dividend

TORONTO, March 4, 2015 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported results for the fourth quarter and full year 2014, including backlog of $2.7 billion – a 50 per cent increase over backlog of $1.8 billion at the end of 2013.  Aecon's Board of Directors approved an increase in the annual dividend to $0.40 per share from $0.36 per share. 

"Aecon's 2014 results were characterized by solid progress towards continued margin improvement, near record backlog, and unprecedented annual new contract awards of $3.5 billion," said Teri McKibbon, President and Chief Executive Officer, Aecon Group Inc. "While 2014 was a transition year with the ramp-up of a significant number of new projects, which impacted revenue timing and muted progress on margins, Aecon's near record backlog of $2.7 billion will see us in good stead as we move through 2015 and beyond." 

HIGHLIGHTS

  • Revenue of $2,614 million for the year ended December 31, 2014 was lower by $455 million compared to 2013. Revenue in each of the Infrastructure, Energy and Mining segments was impacted in 2014 by longer than anticipated securing and ramp-up of new projects.
  • Adjusted EBITDA of $170.2 million (margin of 6.5 per cent) for the year ended 2014 compared to $184.0 million (margin of 6.0 per cent) for the year ended 2013.
  • New contract awards of $3,495 million were booked in 2014 compared to $2,413 million in 2013, an increase of 45 per cent.
  • Backlog of $2,654 million at December 31, 2014 was 50 per cent higher than the $1,773 million at the end of 2013.  All three major operating segments of Infrastructure, Energy, and Mining saw significant improvement in backlog year-over-year. 
    • $0.40 per share ($0.10 per quarter) from $0.36 per share ($0.09 per quarter).

      .

    CONSOLIDATED FINANCIAL HIGHLIGHTS

















    Three months ended


    Year ended

    $ millions (except per share amounts)


    December 31


    December 31



    2014



    2013


    2014



    2013












    Revenue

    $

    722.2


    $

    906.2

    $

    2,614.1


    $

    3,068.6

    Gross profit


    94.6



    94.6


    257.3



    270.5

    Marketing, general and administrative expenses


    (37.9)



    (34.3)


    (149.9)



    (148.0)

    Income from projects accounted for using the equity method


    10.9



    11.3


    33.0



    37.9

    Foreign exchange gain (loss)


    (0.2)



    0.2


    0.2



    0.4

    Gain (loss) on sale of assets and investments


    (0.1)



    (0.9)


    (1.0)



    (0.4)

    Restructuring costs


    (6.5)



    -


    (9.0)



    -

    Gain (loss) on mark-to-market of LTIP program


    (2.6)



    -


    (3.2)



    -

    Depreciation and amortization


    (17.3)



    (16.3)


    (63.6)



    (63.0)

    Operating profit


    40.9



    54.6


    63.7



    97.3

    Financing expense, net


    (5.8)



    (10.6)


    (39.4)



    (38.3)

    Fair value gain (loss) on convertible debentures


    1.8



    (7.3)


    11.2



    (9.8)

    Profit before income taxes


    36.9



    36.7


    35.4



    49.2

    Income tax (expense)


    (8.3)



    (8.4)


    (5.4)



    (8.6)

    Profit

    $

    28.6


    $

    28.3

    $

    30.0


    $

    40.6












    Profit

    $

    28.6


    $

    28.3

    $

    30.0


    $

    40.6

    Exclude:











    Fair value (gain) loss on convertible debentures


    (1.8)



    7.3


    (11.2)



    9.8

    Income tax on fair value gain/loss


    0.5



    (1.9)


    3.0



    (2.6)

    Adjusted profit

    $

    27.3


    $

    33.6

    $

    21.8


    $

    47.8












    Gross profit margin


    13.1%



    10.4%


    9.8%



    8.8%

    MG&A as a percent of revenue


    5.2%



    3.8%


    5.7%



    4.8%

    Adjusted EBITDA


    75.9



    79.1


    170.2



    184.0

    Adjusted EBITDA margin


    10.5%



    8.7%


    6.5%



    6.0%

    Operating margin


    5.7%



    6.0%


    2.4%



    3.2%

    Earnings per share - basic

    $

    0.51


    $

    0.54

    $

    0.55


    $

    0.77

    Earnings per share - diluted

    $

    0.39


    $

    0.48

    $

    0.51


    $

    0.72












    Adjusted earnings per share - basic

    $

    0.49


    $

    0.64

    $

    0.40


    $

    0.91

    Adjusted earnings per share - diluted

    $

    0.39


    $

    0.50

    $

    0.40


    $

    0.84












    Backlog






    $

    2,654


    $

    1,773












    (1)

    This press release presents certain non-GAAP and additional GAAP (GAAP refers to Canadian Generally Accepted Accounting Principles) financial measures to assist readers in understanding the Company's performance.  Non-GAAP financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with GAAP in the consolidated financial statements. Further details on non-GAAP and additional GAAP measures are included in the Company's Management's Discussion and Analysis and available through the System for Electronic Document Analysis and Retrieval at www.sedar.com.

    (2)

    "Operating profit (loss)" represents the profit (loss) from operations, before net financing expense, income taxes and non-controlling interests. 

    (3)

    "Adjusted profit (loss)" represents the profit (loss) adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of convertible debentures.

    (4)

    "Adjusted EBITDA" represents operating profit (loss) adjusted to exclude depreciation and amortization, the gain (loss) on sales of assets and investments, and net income (loss) from projects accounted for using the equity method, but including "JV EBITDA" from projects accounted for using the equity method.

    (5)

    "Adjusted earnings (loss) per share" represents earnings (loss) per share calculated using adjusted profit (loss).

     

    OPERATING AND FINANCIAL RESULTS

    "We expect the strong pipeline of infrastructure projects being pursued, and the demand for Aecon's broad spectrum of power, pipeline, utility, fabrication and module services, as well as mining installation services, will continue to contribute to margin growth," said Teri McKibbon.  "Aecon's exposure to volatility in resource and commodity prices is mitigated through the significant backlog in all three of our operating segments including oil sands related work, the nature of mining work we perform in the oil sands being in large part linked to production rather than new developments, and a very strong pipeline of opportunities in the approximately 80 per cent of revenue not linked directly to oil spending.  Together, these factors capture our strategy of serving diverse sectors, for which Aecon has been purpose-built."

    Revenue of $2,614 million for the year ended December 31, 2014 was lower by $455 million compared to 2013. Revenue in each of the Infrastructure, Energy and Mining segments was impacted in 2014 by longer than anticipated securing and ramp-up of new projects.

    Adjusted EBITDA of $170.2 million (margin of 6.5 per cent) for the year ended 2014 compared to $184.0 million (margin of 6.0 per cent) for the year ended 2013.

    Operating profit of $63.7 million in 2014 decreased by $33.6 million compared to 2013 primarily due to the above noted lower revenue in 2014.  Gross profit margin increased in 2014 to 9.8 per cent from 8.8 per cent in 2013, but overall gross profit decreased by $13.2 million compared to the prior year.

    Backlog was $2,654 million at December 31, 2014 compared to $1,773 million at the end of 2013.  New contract awards of $3,495 million were booked in 2014 compared to $2,413 million in 2013. 

    Not included in backlog, but important to Aecon's prospects due to the significant volume involved, is the expected recurring revenue from Aecon's growing alliances and supplier-of-choice arrangements where the amount and/or value of work to be carried out is not specified.  This recurring revenue represents approximately 25 per cent of annual revenue. 

    REPORTING SEGMENTS 

    Aecon reports its financial performance on the basis of four segments: Infrastructure, Energy, Mining, and Concessions. 

    INFRASTRUCTURE SEGMENT

    The Infrastructure segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and on a selected basis, internationally.  The Infrastructure segment focuses primarily on the transportation, heavy civil and social infrastructure markets.

    Financial Highlights














    Three months ended



    Year ended

    $ millions


    December 31



    December 31



    2014



    2013



    2014



    2013













    Revenue

    $

    238.9


    $

    277.9


    $

    871.9


    $

    1,000.0

    Gross profit

    $

    26.6


    $

    13.9


    $

    57.9


    $

    35.4

    Adjusted EBITDA

    $

    21.0


    $

    4.6


    $

    25.5


    $

    (1.2)

    Operating profit (loss)

    $

    14.9


    $

    0.2


    $

    4.4


    $

    (18.2)













    Adjusted EBITDA margin


    8.8%



    1.7%



    2.9%



    (0.1)%

    Operating margin


    6.2%



    0.1%



    0.5%



    (1.8)%

    Backlog







    $

    1,263


    $

    820













     

    For the year ended December 31, 2014, revenue in the Infrastructure segment of $872 million was $128 million, or 13 per cent lower than in the previous year. Revenue was higher in heavy civil operations following several new project awards in 2014.  Offsetting this was lower revenue in social infrastructure primarily due to the impact of a strategic shift away from lower margin buildings and mechanical work, and towards opportunities such as water and wastewater treatment projects, as well as from the closure of the Seattle operations in the first quarter of 2014. 

    Operating profit in the Infrastructure segment in 2014 was $4.4 million, an increase of $22.6 million compared to an operating loss of $18.2 million in 2013.  The largest improvement occurred in transportation operations, including higher margins in Western Canada in 2014.  Operating profit also increased in heavy civil operations primarily due to higher revenue combined with higher margins in 2014.  These improvements were partially offset by lower operating profit in social infrastructure due to the above noted decrease in revenue in this sector.  Operating profit in Infrastructure also reflects the impact of a $2.6 million charge incurred as a result of the closure of the Seattle operations in 2014 and $1.9 million of restructuring costs associated with organizational restructuring in the fourth quarter of 2014.

    Infrastructure backlog at December 31, 2014 was $1,263 million, which is $443 million higher than the previous year with most of the increase occurring in transportation and heavy civil operations.  New contract awards totaled $1,314 million in 2014 compared to $700 million in the prior year.  The increase in new awards reflects the impact of several large project awards announced in 2014 including the York Viva Bus Rapid Transit project, the Second Concession Road project, and the Highway 410 project all in Ontario in transportation; the John Hart Generating Station project in British Columbia in heavy civil; and the Waterloo LRT Light Rail Transit project in both heavy civil and transportation in Ontario; along with Regina's new Wastewater Treatment Plant in Saskatchewan. 

    ENERGY SEGMENT

    The Energy segment encompasses a full suite of service offerings to the energy market including industrial construction and manufacturing activities such as in-plant construction, site construction and module assembly. The Energy segment focuses primarily on the following sectors: oil and gas, power generation, pipelines, utilities, and energy support services.

























    Financial Highlights














    Three months ended



    Year ended

    $ millions


    December 31



    December 31



    2014



    2013



    2014



    2013













    Revenue

    $

    340.5


    $

    466.4


    $

    1,251.4


    $

    1,396.4

    Gross profit

    $

    38.3


    $

    64.6


    $

    128.5


    $

    153.1

    Adjusted EBITDA

    $

    22.6


    $

    53.3


    $

    72.4


    $

    97.4

    Operating profit

    $

    17.2


    $

    49.6


    $

    56.6


    $

    84.1













    Adjusted EBITDA margin


    6.6%



    11.4%



    5.8%



    7.0%

    Operating margin


    5.0%



    10.6%



    4.5%



    6.0%

    Backlog







    $

    955


    $

    876













     

    Revenue in the Energy segment of $1,251 million in 2014 was $145 million, or 10 per cent, lower than the previous year, with substantially all of the lower revenue occurring in utilities, primarily due to lower volume from pipeline projects in Western Canada, whereas revenue from industrial operations in 2014 was comparable to the previous year.  In industrial, higher revenue in Western Canada reflected an increase in site construction projects in the resource sector due to new awards and scope growth on existing projects, partially offset by a decrease in fabrication and module assembly work.  Revenue from industrial operations was also higher in Atlantic Canada due to an increased volume of fabrication projects, and in Innovative Steam Technologies (IST) due to higher sales of heat recovery steam generators and an increase in service revenue.  These increases in industrial operations were offset by lower revenue in Central Canada primarily from project delays in the power sector.

    Operating profit of $56.6 million for the full year 2014 decreased by $27.5 million compared to the previous year.  In utilities, despite lower revenue, operating profit improved slightly year-over-year due in part from higher margins in Western Canada in 2014.  As such, the decrease in segment operating profit occurred in industrial operations, and resulted primarily from lower profit in both Western and Central Canada.  The decrease in Western Canada was largely the result of lower margins from site construction projects, while the decrease in Central Canada was primarily volume driven.  Segment operating profit was also impacted by $1.8 million in restructuring costs associated with organizational restructuring in the fourth quarter of 2014.

    Backlog at December 31, 2014 of $955 million was $79 million higher than the previous year.  Backlog increased in industrial operations primarily from new contract awards in Western Canada in the resources sector, which offset lower backlog in utilities operations as a result of significant work off of pipeline projects in Western Canada.  New contract awards of $1,331 million in 2014 were $56 million higher than in 2013.  Most of the increase in new awards occurred in industrial operations in Western Canada and in IST.

    MINING SEGMENT

    The Mining segment offers turn-key services consolidating Aecon's mining capabilities and services across Canada, including both mine site installations and contract mining.  This segment offers construction services that span the scope of a project's life cycle: from overburden removal and resource extraction, to processing and environmental reclamation.

























    Financial Highlights














    Three months ended



    Year ended

    $ millions


    December 31



    December 31



    2014



    2013



    2014



    2013













    Revenue

    $

    153.0


    $

    169.4


    $

    516.1


    $

    705.8

    Gross profit

    $

    30.5


    $

    20.5


    $

    72.5


    $

    86.7

    Adjusted EBITDA

    $

    25.0


    $

    22.3


    $

    49.2


    $

    74.5

    Operating profit

    $

    16.2


    $

    14.8


    $

    20.7


    $

    48.0













    Adjusted EBITDA margin


    16.3%



    13.2%



    9.5%



    10.6%

    Operating margin


    10.6%



    8.7%



    4.0%



    6.8%

    Backlog







    $

    436


    $

    77













     

    For the year ended December 31, 2014, revenue in the Mining segment of $516 million was $190 million, or 27 per cent, lower than in the previous year.  A substantial portion of the decrease was due to lower volume of site installation work in the commodity mining sector (due to initial delays experienced early in 2014 in securing and then ramping up new project awards, combined with the substantial completion of several projects since the end of 2013).  Lower revenue in 2014 was also the result of lower volume of contract mining services in the oil sands as operations were impacted by temporary client production shutdowns during 2014.  These decreases were partially offset by higher revenue from civil and foundations work related to mining projects in Western Canada.

    Operating profit of $20.7 million for the full year 2014 decreased by $27.3 million compared to the previous year.  The decrease in operating profit was largely due to the above noted volume reductions in both the commodity mining sector and in contract mining, partially offset by an increase in operating profit from civil and foundations work.  Segment operating profit was also impacted by $0.9 million in restructuring costs associated with organizational restructuring in the fourth quarter of 2014.

    Backlog at December 31, 2014 of $436 million was $359 million higher than the previous year.  New contract awards of $875 million in 2014 were $403 million higher than in 2013.  The increase in backlog and new awards was largely due to project awards with a potash customer in the commodity mining sector, as well as new awards in the contract mining sector, including a large mining site development project award at the Fort Hills project in Alberta.

    CONCESSIONS SEGMENT

    The Concessions segment includes the development, financing, design, construction and operation of infrastructure projects by way of build-operate-transfer, build-own-operate-transfer and other public-private partnership contract structures. 

    Financial Highlights














    Three months ended



    Year ended

    $ millions


    December 31



    December 31



    2014



    2013



    2014



    2013













    Revenue

    $

    0.8


    $

    1.0


    $

    2.9


    $

    3.0

    Gross profit

    $

    (0.8)


    $

    (4.4)


    $

    (1.6)


    $

    (4.7)

    Income from projects accounted for using the equity method

    $

    5.8


    $

    5.0


    $

    24.6


    $

    23.6

    Adjusted EBITDA

    $

    11.8


    $

    7.5


    $

    48.4


    $

    39.8

    Operating profit

    $

    3.3


    $

    0.2


    $

    18.7


    $

    16.6













     

    Revenue reported in the Concessions segment for the years ended December 31, 2014 and 2013, was $2.9 million and $3.0 million, respectively.

    Operating profit of $18.7 million represents a $2.1 million increase compared to the prior year. The increase is due to higher revenue and profitability from the Quiport JV following the transition of operations from the old Quito, Ecuador airport to the new Quito airport in February 2013, including higher year-over-year passenger traffic associated with the first full year of operations in 2014.  This increase more than offset higher amortization and interest expense in the Quiport JV.  Following the opening of the new Quito airport on February 20, 2013, the project commenced expensing interest (whereas prior to the opening of the new Quito airport, interest was being capitalized) and began amortizing airport assets that were put into service as of that date.

    DIVIDEND

    The annual dividend will be paid to all shareholders of Aecon Common shares and will increase to $0.40 per share (from $0.36 per share) to be paid in four quarterly payments of $0.10 per share (from $0.09 per share).  The first increased quarterly payment will be paid on April 1, 2015 to shareholders of record on March 20, 2015. 

    OUTLOOK

    "As we move forward in 2015, all major projects in Aecon's backlog are progressing well and we remain focused on continuing to improve margins," said John M. Beck, Executive Chairman, Aecon Group Inc.  "Aecon's diversified portfolio of work, focus on execution, and strong financial position continue to be key strengths in capitalizing on the opportunities ahead." 

    CONSOLIDATED RESULTS

    The consolidated results for the years ended December 31, 2014 and 2013 are available at the end of this news release.

    Balance Sheet Highlights







    December 31


    Dec. 31

      $ thousands (unaudited)


    2014


    2013






    Cash and cash equivalents and restricted cash

    $

    143,215

    $

    244,536

    Other current assets


    819,920


    885,052

    Property, plant and equipment


    493,108


    512,257

    Other long-term assets


    373,867


    351,741

    Total Assets

    $

    1,830,110

    $

    1,993,586






    Current liabilities

    $

    823,981

    $

    940,356

    Long-term debt


    113,612


    123,128

    Convertible debentures (long term portion)


    157,291


    248,817

    Other long-term liabilities


    79,276


    94,677






    Equity


    655,950


    586,608

    Total Liabilities and Equity

    $

    1,830,110

    $

    1,993,586

     

    CONFERENCE CALL

    A conference call has been scheduled for Thursday, March 5, 2015 at 10:30 a.m. (ET) to discuss Aecon's 2014 year-end financial results.  Participants should dial 416-641-6680 or 1-800-379-4140 at least 10 minutes prior to the conference time.  For those unable to attend the call, a replay will be available after 1:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on March 12, 2015.  The reservation number is 21760029.

    ABOUT AECON

    Aecon Group Inc. is a Canadian leader in construction and infrastructure development providing integrated turnkey services to private and public sector clients.  Aecon is pleased to be consistently recognized as one of the Best Employers in Canada.

    STATEMENT ON FORWARD-LOOKING INFORMATION

    The information in this press release includes certain forward-looking statements. These forward-looking statements are based on currently available competitive, financial and economic data and operating plans but are subject to risks and uncertainties.  In addition to events beyond Aecon's control, there are factors which could cause actual or future results, performance or achievements to differ materially from those expressed or inferred herein including, but not limited to: interest and foreign exchange rates, global equity and capital markets, business competition and operational and reputational risks, including Large Project Risk and Contractual Factors.  Readers are referred to the specific risk factors relating to and affecting Aecon's business and operations as filed by Aecon pursuant to applicable securities laws.  Forward-looking statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, ongoing objectives, strategies and outlook for Aecon.  Forward-looking statements, may in some cases be identified by words such as "will," "plans," "believes," "expects," "anticipates," "estimates," "projects," "intends," "should" or the negative of these terms, or similar expressions.  Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Aecon undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

    CONSOLIDATED STATEMENTS OF INCOME












    FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

    (in thousands of Canadian dollars, except per share amounts)


















    December 31

    December 31




    2014

    2013















    Revenue


    $

    2,614,078

    $

    3,068,608

    Direct costs and expenses



    (2,356,799)


    (2,798,134)

    Gross profit



    257,279


    270,474








    Marketing, general and administrative expenses



    (149,932)


    (148,004)

    Depreciation and amortization



    (63,585)


    (63,024)

    Income from projects accounted for using the equity method



    32,995


    37,852

    Other income (loss)



    (13,049)


    (42)

    Operating profit



    63,708


    97,256








    Finance income



    2,909


    1,953

    Finance costs



    (42,344)


    (40,289)

    Fair value gain (loss) on convertible debentures



    11,166


    (9,750)

    Profit before income taxes



    35,439


    49,170

    Income tax expense



    (5,397)


    (8,572)

    Profit for the year


    $

    30,042

    $

    40,598















    Basic earnings per share


    $

    0.55

    $

    0.77

    Diluted earnings per share


    $

    0.51

    $

    0.72

     

    SOURCE Aecon Group Inc.

    For further information: David Smales, EVP and Chief Financial Officer, Aecon Group Inc., 416-297-2619, dsmales@aecon.com

    RELATED LINKS
    http://www.aecon.com

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