Stuart Olson Reports Second Quarter 2015 Results and Declares Quarterly Dividend

Increased Contract Income, EBITDA and EBITDA Margin; $2.0B Backlog

CALGARY, Aug. 11, 2015 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the second quarter and first half of 2015 and declared a quarterly dividend of $0.12 per common share.

"We achieved improved contract income and EBITDA results in the second quarter even while facing headwinds from a low commodity price environment," said David LeMay, President and CEO of Stuart Olson. "As anticipated, revenues were lower compared to a year ago, however margins strengthened as we focused on our core markets and customers within the Buildings Group. The Industrial Group also maintained strong margin performance in a very competitive market, reflecting the positive impact of the Studon acquisition which has brought us greater client and service diversification. Our exposure to increasingly diverse regions and segments of the construction market, solid project management and tight cost control are helping us respond effectively to the current market challenges as we execute on our $2.0 billion backlog."


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The convertible debentures issued in 2010, and repaid prior to quarter-end in June 2015, were presented as a current liability of $84.8 million as at December 31, 2014.


Three month and six month ended June 30, 2014 results have been restated to reflect Broda as discontinued operations.

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", "EBITDA", "EBITDA margin", "backlog", and "working capital", are not prescribed measures under IFRS. For a description of these measures, see the "Non-IFRS Measures" section in Stuart Olson's Q2 2015 Management's Discussion & Analysis.

Second Quarter Overview

  • Backlog of $2,049.1 million reflects $268.9 million in new contract awards and net increases in the scope of existing projects awarded during the second quarter. The backlog consists of approximately 85.8% low-risk contracts, including 60.6% construction management ("CM") work and 25.2% cost-plus arrangements. Tendered (hard-bid) work represents approximately 14.2% of the backlog.
  • Consolidated second quarter revenue of $303.7 million decreased 5.9% from $322.9 million in Q2 2014.
    • Industrial Group revenue decreased by 0.9% to $106.8 million, reflecting the reduction in new oil sands construction activity and the wind-down of a significant one-time oil sands project that strongly benefitted 2014 results. These impacts were largely offset by the addition of revenue from Studon Electric & Controls Inc. ("Studon"), which was acquired in January 2015.
    • As anticipated, Buildings Group revenue decreased by 11.7% to $142.8 million as the group neared completion on its remaining industrial site projects and increased its focus on core areas of strength.
    • Commercial Systems Group revenue increased by 8.5% to $63.9 million, reflecting increased project activity in Northern Alberta and British Columbia.
  • Consolidated contract income increased 15.3% to $31.7 million, and contract income margin improved to 10.4% from 8.5%, primarily reflecting higher margins from the Buildings Group and the benefit of intersegment eliminations resulting from project timing and stage of completion.
  • EBITDA increased 33.3% to $13.2 million, from $9.9 million in Q2 2014, primarily reflecting the higher contract income. EBITDA margin improved to 4.3% from 3.1%.
  • Second quarter net earnings from continuing operations were $1.7 million (diluted earnings per share of $0.06), compared to $1.8 million (diluted earnings per share in Q2 2014 of $0.07) as a result of interest costs associated with having two sets of convertible debentures outstanding until June 30, 2015, when the 2010 debentures matured and were repaid. Increased amortization associated with the intangibles recorded as part of the Studon acquisition and increased tax expense associated with the increase in the general Alberta corporate income tax rate were also factors in the year-over-year change in net earnings from continuing operations.
  • Second quarter net earnings increased to $1.7 million (diluted earnings per share of $0.06), a $1.7 million improvement compared to nil (diluted earnings per share in Q2 2014 of nil). The Q2 2014 results included a $1.9 million net loss related to our former Broda business.
  • On May 19, 2015, Stuart Olson announced over $100 million in new industrial awards, including:
    • An $80.0 million contract with Manitoba Hydro to install and commission four synchronous condensers for the Riel Station in Winnipeg; and
    • A $25.0 million three-year extension to a master services agreement to provide maintenance services to a major oil sands customer in Alberta.
  • As at June 30, 2015, the Company was in full compliance with the debt covenants under its revolving credit facility, had available cash of $35.0 million and additional borrowing capacity of approximately $80.3 million.
  • Subsequent to the quarter-end, the Company successfully amended its revolving credit facility, extending it by three years and negotiating improved terms and conditions.
  • Stuart Olson's Board of Directors declared a quarterly dividend of $0.12 per common share. The dividend will be paid on October 15, 2015 to shareholders of record on September 30, 2015. The Company has a dividend reinvestment plan in place; details are available on Stuart Olson's website (


Stuart Olson expects consolidated revenue for 2015 to be lower than in 2014. This reflects the Buildings Group's shift away from higher-risk industrial site projects, which is reducing revenue but improving margins. Revenue is also expected to be negatively impacted by reduced demand for new industrial construction in Alberta, although this impact will be offset by the addition of Studon revenue in 2015, the recent addition of industrial contracts in the Northwest Territories and Manitoba and by stable volumes of maintenance work in Alberta. The Company continues to see good opportunities for infrastructure projects in all of its geographic markets and is moving forward with a strong $2.0 billion backlog dominated by public projects distributed across multiple provinces.

"We are managing the business tightly as we implement our strategies," said Mr. LeMay. "While market conditions are challenging, we are making steady progress on margin improvement. We expect EBITDA and EBITDA margin to increase year-over-year through our emphasis on areas of core strength, together with disciplined cost control and strong project execution."

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

  • The legacy Industrial Group businesses and the Studon business are expected to experience a year-over-year reduction in revenue related to the decline in industrial construction opportunities in Alberta. In addition, the legacy businesses are currently in the wind-down phase of a large construction project that significantly benefited 2014 results. Consolidated Industrial Group EBITDA margins are expected to be weaker year-over-year as a result of increased competition, oil sands operators seeking supplier cost reductions in response to lower oil prices, and an increased proportion of lower-risk cost reimbursable MRO projects in the revenue mix.
  • The Buildings Group anticipates higher EBITDA and EBITDA margins on lower revenue compared to 2014 as a result of significantly reduced exposure to higher-risk industrial site projects.
  • Commercial Systems Group revenue for 2015 is expected to be similar to 2014 results, but with slightly lower EBITDA margins, reflecting project stage of completion and the impact of competitive pressures on margins for new work.

Stuart Olson will hold a conference call and webcast to discuss its second quarter and first half 2015 results tomorrow, August 12, 2015 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 our website at For those unable to listen during the live webcast, a replay will be available on Stuart Olson's 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, September 2, 2015, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 095857. The public is invited to listen to the live conference call, webcast or the replay.

About Stuart Olson Inc.

Stuart Olson Inc. provides building construction, commercial and industrial electrical contracting, and industrial insulation services to an array of public and private sector clients. 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 related to Stuart Olson's expectations regarding 2015 revenue visibility and generation, 2015 EBITDA margin realization and 2015 backlog execution. 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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