Stuart Olson Reports First Quarter 2016 Results and Declares Quarterly Dividend

Record Backlog of $2.2B; Improved Contract Income Margin

CALGARY, May 3, 2016 /CNW/ -Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the first quarter of 2016, and declared a quarterly dividend of $0.12 per common share.

"Our backlog grew to a record $2.2 billion in the first quarter of 2016 as we added the previously announced five-year oil sands 'MRO' or maintenance repair and operations contract to backlog," said David LeMay, President and CEO of Stuart Olson.

"Our underlying operational performance also strengthened as we achieved higher contract income and adjusted EBITDA from both the Buildings Group and Commercial Systems Group and stable adjusted EBITDA from the Industrial Group, despite challenging conditions in the Alberta market. Excluding the impact of non-cash intersegment eliminations and the marking-to-market of share-based compensation in both periods, first quarter 2016 adjusted EBITDA was $10.4 million, $3.6 million higher than we achieved on a consistent basis for the same period in 2015. Our market and industry diversification strategies are helping to drive this improvement, while also contributing to our solid financial position," said Mr. LeMay.


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These financial results are presented in conformance with International Financial Reporting Standards ("IFRS"). All figures are in Canadian dollars unless otherwise noted. Certain financial and operational measures referred to in this press release, including "contract income margin", "adjusted EBITDA", "adjusted EBITDA margin", "backlog", "working capital", "adjusted free cash flow" and "adjusted free cash flow per share", are not prescribed measures under IFRS. For a description of these measures, see the "Non-IFRS Measures" section in Stuart Olson's March 31, 2016 Management's Discussion & Analysis.

First Quarter (Q1) 2016 Overview

  • The Company ended Q1 2016 with a $2.2 billion backlog, the highest in Stuart Olson history. The record backlog includes a diverse mix of public, private and industrial projects across Western Canada, Ontario and the Northwest Territories, and is predominantly made up of low-risk contract arrangements.
  • As previously announced, Stuart Olson was awarded a five-year master services agreement (MSA) valued at approximately $500.0 million to provide maintenance, repair and operations (MRO) services to a longstanding oil sands customer in Alberta. Under the terms of the multi-site, multi-use contract, the company will deliver a bundled service offering, drawing on the expertise of a diverse range of its Industrial Group service providers.
  • Revenue for the three months ended March 31, 2016 was $243.0 million, compared to $282.9 million in Q1 2015.
    • First quarter revenue from the Industrial Group increased by 13.1% to $93.1 million. The year-over-year improvement was driven by increased activity on the mining project in the Northwest Territories, partially offset by a reduction in Alberta oil sands activity. Industrial Group contract income declined 7.7% to $8.4 million and contract income margin decreased to 9.0% from 11.1%. These changes reflect the increased proportion of lower risk cost-reimbursable work in the project mix and the impact of oil sands project owners seeking supplier cost reductions.
    • The Buildings Group generated higher contract income on lower revenues. First quarter revenue of $97.8 million declined 36.2% year-over-year due to delays in the awarding of planned infrastructure projects by the Alberta and federal governments, the planned wind-down of the group's industrial activity and the completion of projects that provided significant revenue in Q1 2015. Contract income increased 31.9% to $9.1 million reflecting additional profit being realized on a couple of significant projects nearing completion in Q1 2016. It also reflects the group's strategic move away from higher-risk industrial projects. Contract income margin increased to 9.3% from 4.5% in Q1 2015.
    • Commercial Systems Group revenue increased 1.9% to $58.0 million, reflecting higher activity levels on certain projects. Contract income increased 10.5% to $8.4 million, and contract income margin increased to 14.5% from 13.4% as a result of changes in project stage of completion.
  • On a consolidated basis, underlying operational performance improved and contract income margin increased to 9.6% from 8.8%, however first quarter contract income declined 6.4% to $23.3 million. The non-cash impact of a $2.6 million reversal of intersegment eliminations in Q1 2016, as compared to a positive $1.3 million impact in Q1 2015, was the key factor in the year-over-year change in contract income.
  • The Company generated first quarter adjusted EBITDA of $6.4 million, compared to $10.5 million in Q1 2015, primarily as a result of the timing of intersegment eliminations and the increased expense related to marking-to-market share-based compensation. Excluding the impact of these two non-cash items, first quarter adjusted EBITDA was $10.4 million, $3.6 million higher than what Stuart Olson achieved on a consistent basis in the same period last year.
  • First quarter net loss of $0.9 million (diluted loss per share of $0.03), compares to net earnings of $1.0 million (diluted earnings per share of $0.04) in Q1 2015. The decrease in net earnings was primarily due to lower adjusted EBITDA, partially offset by reduced financing costs.
  • The Company's financial flexibility remained strong with a net debt to EBITDA ratio of 1.8x and a dividend payout ratio of 33.7% based on last twelve month adjusted free cash flow. The Company's healthy balance sheet was supported by a cash balance of $42.8 million and additional borrowing capacity of approximately $104.4 million as at March 31, 2016.
  • On May 3, 2016, the Board of Directors ("Board") declared a quarterly common share dividend of $0.12 per share. The dividend is designated as an eligible dividend under the Income Tax Act (Canada) and is payable July 14, 2016 to shareholders of record on June 30, 2016.
  • In the first quarter of 2016, Bob Myles joined Stuart Olson as Group Chief Operating Officer, Industrial.


The Company anticipates that 2016 consolidated revenue will be slightly lower than the level achieved in 2015. Due to project timing, first half revenue is expected to be lower and second half revenue is expected to be higher compared to 2015. The revenue outlook is supported by a strong $2.2 billion backlog, which provides line of sight to activity levels for 2016 and into 2017, and reflects the Company's access to many different segments and geographic markets within the Canadian construction market. Both the Buildings Group and Commercial Systems Group are executing backlogs dominated by public projects across multiple provinces. The Industrial Group has been successful in winning significant new business within Alberta and beyond. We balance this outlook with the potential for unknown impacts from the current "lower-for-longer" commodity pricing environment.

Adjusted EBITDA and adjusted EBITDA margin are expected to modestly decline in 2016, reflecting the continuation of challenging economic conditions in the Alberta market and an increased proportion of lower-risk, and correspondingly lower-margin, MRO projects within the Industrial Group. Adjusted EBITDA results are also expected to continue to reflect the reversal of intersegment eliminations that benefited 2015 results.

Stuart Olson's outlook for its three business groups is as follows:

  • Industrial Group 2016 revenue is expected to be relatively consistent with 2015, supported by a large and growing base of oil sands MRO work. The Industrial Group significantly strengthened its MRO base in 2015 and early 2016 with the addition of new and extended MSA agreements with oil sands customers, including the $500.0 million multi-year MSA announced with a key longstanding customer in February 2016. This latter agreement includes a major turnaround project in 2016. The outlook for the Industrial Group is further supported by the execution of large industrial projects outside of Alberta, including a power distribution project in Manitoba and the completion in 2016 of the mining project in the Northwest Territories. Adjusted EBITDA and adjusted EBITDA margin as a percentage of revenue are expected to be weaker year-over-year as a result of competitive market pressures in Alberta and an increased proportion of revenue coming from lower-risk cost-reimbursable MRO projects.
  • The Buildings Group anticipates higher adjusted EBITDA and adjusted EBITDA margin in 2016 on slightly lower revenue compared to 2015. The Buildings Group's 2016 revenue will be supported by predominantly public projects in multiple provinces, including the group's growing activity in Ontario. The higher adjusted EBITDA expectations primarily reflect the favourable shift in project mix, and to a lesser extent, a change in project stage of completion with several larger public projects scheduled to reach completion in 2016.
  • Commercial Systems Group revenue, adjusted EBITDA and adjusted EBITDA margins are expected to be slightly lower than in 2015, reflecting the competitive market environment in Alberta.

Stuart Olson will hold a conference call and webcast to discuss its first quarter 2016 results on Wednesday, May 4, 2016 at 7:30 a.m. Mountain Time (9:30 a.m. Eastern). The webcast will be broadcast live and will also be available for replay in the Presentations & Events subsection under Investor Relations on the Company's website at For those unable to listen during the live webcast, a replay will be available on the website shortly after the conclusion of the conference call for a period of 90 days. Financial analysts and institutional investors who wish to ask questions during the conference call are invited to call 1-888-390-0546 (Canada and USA) or 1-587-880-2171 (outside Canada and USA). For those unable to participate on the live call, a replay will be made available until Wednesday, May 18, 2016, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 593297. The public is invited to listen to the live conference call, webcast or the replay.

About Stuart Olson Inc.

Stuart Olson Inc. provides general contracting and electrical building systems contracting in the public and private construction markets as well as electrical, mechanical and specialty trades, such as insulation, cladding and asbestos abatement, in the industrial construction and services market. The Company operates office locations throughout British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stuart Olson's common shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols "SOX" and "SOX.DB.A", respectively.

Forward Looking Information

This press release contains certain statements that may constitute forward-looking information within the meaning of applicable securities laws. This forward-looking information includes, without limitation, the statements relating to:


the recently awarded $500 million Industrial Group contract, including the estimated value, timing and scope of the award; and


made under the section entitled "Outlook" including, without limitation, those relating to:


2016 revenue visibility;


Stuart Olson's backlog and the implication that such backlog provides line of sight to activity levels in 2016 and 2017;


2016 EBITDA and EBITDA margin projections;


economic conditions; and


the outlook for each of Stuart Olson's business groups.


Often, but not always, forward-looking information can be identified by the use of such words as "may", "will", "expect", "believe", "plan", "intend", "estimate", "outlook", "forecast", "should", "anticipate" and other similar terminology, including statements concerning possible or assumed future results. Forward-looking information is based on management's reasonable assumptions, analysis and estimates in respect of its experience and perception of trends, current economic conditions, government policies and expected developments, as well as other material factors that it considers to be relevant at the time of making such statements.

The forward-looking information in this press release is included solely for the purpose of assisting investors in understanding the Company's financial position and the results of its operations as at the date hereof. By its nature, forward-looking information involves known and unknown risks and uncertainties, which give rise to the possibility that management's assumptions, analysis and estimates will be incorrect and that the Company's anticipated results will not be achieved. Although the Company believes that the statements with respect to forward-looking information are reasonable and current, such statements should not be interpreted as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. Forward-looking information is necessarily subject to a number of factors that may cause actual results to differ materially from those results implied by the expectations suggested by such information. Those factors include, without limitation, the risks and uncertainties described in the Company's Annual Information Form filed with the securities regulatory authorities in Canada under the Company's profile at Readers are encouraged to consider the foregoing risks and other factors carefully when evaluating the forward-looking information and are cautioned not to place undue reliance upon such information when making investment decisions.

The forward-looking information in this press release is current to the date hereof, and is subject to change following such date. While the Company may elect to do so, unless required by applicable law, it undertakes no obligation to update this information to reflect new information or circumstances at any particular time.

SOURCE Stuart Olson Inc.

For further information: David LeMay, President and Chief Executive Officer, Stuart Olson Inc., (403) 685-7777, Email:; Daryl Sands, Executive Vice President and Chief Financial Officer, Stuart Olson Inc., (403) 685-7777, Email:


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