Stuart Olson Reports Second Quarter 2016 Results and Declares Quarterly Dividend

Backlog of $2.1 Billion; Wildfires Impact Q2 Results

CALGARY, Aug. 9, 2016 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the second quarter and first six months of 2016, and declared a quarterly dividend of $0.12 per common share.

Results for the second quarter reflect the impact of wildfires in Northern Alberta which disrupted Industrial Group activity during the period.  The Industrial Group provides maintenance, repair and operations ("MRO") services to a number of oil sands producers in the Northern Alberta region, and during the crisis moved quickly to shut down affected operations and demobilize hundreds of employees.

"Our first priority is the safety of our employees, their families and the communities in which we operate," said David LeMay, President and CEO. "I am very proud of our team's response in ensuring all of our employees were safely evacuated during the crisis. We have since joined with others in the region to provide ongoing support to the residents of Northern Alberta, and we worked closely with our customers to get operations back up and running as quickly and as smoothly as possible."

Despite the impacts of the wildfires and the added challenges of weak economic conditions in Alberta, Stuart Olson generated a stable contract income margin in the first half of the year and sustained a robust backlog in the second quarter. Buildings Group performance also continued to improve, contributing to adjusted EBITDA margins that are now nearing the target level of 4% to 5% for this group.

Stuart Olson also took decisive steps to enhance efficiency across the Company, implementing a number of restructuring initiatives that, combined with first quarter initiatives, are expected to provide permanent expense reductions going forward. The Company plans to continue to aggressively match its cost structure to the activity of the business over the second half of 2016 and expects those initiatives to further reduce expenses in future periods.

"While the current market challenges in Alberta are significant, Stuart Olson's business model is providing stability, our execution and efficiency are steadily improving, and our balance sheet remains strong and flexible. Going forward, our dividend is well supported and the pipeline of future project opportunities looks promising, particularly with a view to future federal and provincial infrastructure projects," said Mr. LeMay.


Three months ended

Six months ended

June 30

June 30

$millions, except percentages and per share amounts





Contract revenue





Contract income





Contract income margin





Adjusted EBITDA





Adjusted EBITDA margin





Net (loss) earnings





(Loss) earnings per share

Basic (loss) earnings per share





Diluted (loss) earnings per share





Dividends declared per share





Adjusted free cash flow





Adjusted free cash flow per share






Jun. 30,

Dec. 31,




Working capital



Long-term debt (excluding current portion)



Convertible debentures (excluding equity portion)(2)



Total assets




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 June 30, 2016 Management's Discussion & Analysis.

Second Quarter (Q2) 2016 Overview

  • As at June 30, 2016, Stuart Olson's backlog was a strong $2.1 billion and included a diverse mix of public, private and industrial projects from Ontario to British Columbia. The backlog is predominantly made up of low-risk contract arrangements.
  • Revenue for the three months ended June 30, 2016 was $227.2 million, compared to $303.7 million in Q2 2015.
    • Second quarter revenue from the Industrial Group decreased by 31.0% to $73.7 million reflecting negative impacts related to the Northern Alberta wildfires, including the loss of MRO revenue, scope decreases on active projects and revenue impacts from projects that have been deferred until later in 2016 and early 2017. It also reflects a reduction in new construction activity in the oil sands as a result of the low oil price environment. These impacts were partially offset by the Industrial Group's increased activity on the mine site project in the Northwest Territories.
    • The Buildings Group generated higher contract income on lower revenues. Second quarter revenue of $107.8 million declined 24.5% year-over-year due to the planned wind-down of the group's industrial projects, the completion of projects in Manitoba that provided significant revenue in the second quarter of 2015, delays in the rollout of new infrastructure opportunities and delays in the commencement of new projects currently in pre-construction. These impacts were partially offset by the Buildings Group's increased activity levels in the Ontario market. Contract income increased 2.1% to $9.7 million, reflecting additional profit being realized on two significant projects nearing completion in Q2 2016. It also reflects the group's strategic move away from the higher-risk industrial projects that generated negative margin during Q2 2015. Contract income margin increased to 9.0% in Q2 2016, from 6.7% last year.
    • Commercial Systems Group revenue was 19.7% lower at $51.3 million, reflecting year-over-year changes in project stage of completion and the wrap up of a number of projects in British Columbia that contributed significant revenue to last year's results. Contract income decreased 23.3% to $5.6 million, and contract income margin was 10.9% compared to 11.4% last year, reflecting year-over-year changes in project mix and stage of completion, as well as competitive pricing pressures.
  • In response to the challenging economic environment, the Company continued to assess its cost structure in the quarter, with a focus on reducing overhead. Restructuring initiatives in the second quarter, together with year-to-date initiatives, are designed to deliver permanent expense reductions going forward. Initiatives undertaken in the quarter included the planned sublease, termination and consolidation of leased office spaces within all three operating groups and a realignment of the operating structure within the Industrial Group and Commercial Systems Group. Restructuring and impairment charges of $5.4 million related to these initiatives were recognized during the quarter. In addition, the Company expects to continue to aggressively match its cost structure to the activity of the business over the second half of 2016 and expects those initiatives to further reduce expenses in future periods.
  • On a consolidated basis, second quarter contract income margin was 9.5%, down slightly from 10.4% last year. Contract income was $21.6 million compared to $31.7 million last year. Prior-year contract income included the benefit of $2.5 million in positive intersegment eliminations, while Q2 2016 results included both the negative impact of the Northern Alberta wildfires and the recognition of restructuring costs.
  • The Company generated second quarter adjusted EBITDA of $7.2 million (adjusted EBITDA margin of 3.2%), compared to $12.9 million (adjusted EBITDA margin of 4.2%) in Q2 2015. These results reflect the lower contract income, partially offset by a reduction in core administrative costs (before depreciation and restructuring costs) and lower share-based compensation expense.
  • Second quarter net loss of $3.4 million (diluted loss per share of $0.13), compares to net earnings of $1.7 million (diluted earnings per share of $0.06) in Q2 2015. The decrease in net earnings primarily reflects lower adjusted EBITDA and the recognition of restructuring costs, partially offset by reduced financing costs, depreciation and tax expense. Excluding the after-tax impact of the $5.4 million in restructuring and impairment charges, second quarter net profit was $0.5 million (diluted earnings per share of $0.02).
  • The Company's healthy balance sheet was supported by a cash balance of $34.1 million and additional borrowing capacity of approximately $59.5 million at quarter end.
  • Subsequent to the quarter end, on July 13, 2016, Stuart Olson successfully amended its revolving credit facility, extending the maturity date by one year to 2021 and negotiating improved terms. This amendment maintains the Company's maximum borrowing capacity at $175.0 million.
  • On August 9, 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 October 13, 2016 to shareholders of record on September 30, 2016.


The Company anticipates that 2016 consolidated revenue will be lower than the level achieved in 2015. This revenue outlook reflects the negative impact of the Northern Alberta wildfires on Industrial Group activity in the oil sands, as well as the continuation of challenging market conditions in Alberta related to the "lower-for-longer" oil price environment. These impacts are tempered by Stuart Olson's strong $2.1 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 the Commercial Systems Group are executing backlogs dominated by public projects across multiple provinces. The Industrial Group also continues to successfully pursue new business opportunities both within and outside of Alberta.

Adjusted EBITDA and adjusted EBITDA margin are expected to decline in 2016, reflecting the direct and indirect impact of the wildfires on the Industrial Group's business, 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 in the second half of 2016 are also expected to include the reversal of intercompany eliminations that favourably impacted 2015 results.

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

  • Industrial Group 2016 revenue is expected to be below 2015 levels as a result of oil sands production shutdowns and slowdowns related to the recent wildfires in Northern Alberta, as well as the related deferral of oil sands project opportunities that were expected to benefit the group's financial results in the second half of the year. These impacts will be partially offset 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. Industrial Group adjusted EBITDA and adjusted EBITDA margin are expected to be significantly lower year-over-year as a result of the productivity challenges and additional costs associated with demobilizing and remobilizing on oil sands sites impacted by the wildfire crisis. Competitive market pressures in Alberta and an increased proportion of revenue coming from lower-risk cost-reimbursable MRO projects are also expected to negatively impact results from the group.
  • The Buildings Group anticipates higher adjusted EBITDA and adjusted EBITDA margin in 2016 on lower revenue compared to 2015. This outlook reflects the strategic shift undertaken in 2015 by the Buildings Group to discontinue industrial sector projects and to re-focus efforts on the group's core strengths in the public and private construction markets. In addition, this lower revenue also reflects delays in the award of new infrastructure opportunities, as well as delays in the commencement of new projects currently in pre-construction. 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 lower than in 2015, reflecting the completion in 2015 of a number of significant projects and the competitive market environment in Alberta.

Stuart Olson will hold a conference call and webcast to discuss second quarter 2016 results on Wednesday, August 10, 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, August 24, 2016, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 012608. 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. 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.  Forward-looking information includes financial outlook or future-oriented financial information.  Any financial outlook or future-oriented financial information in the press release has been approved by management of Stuart Olson.  Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future.  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 contained in this press release includes, without limitation, the statements relating to:


Plans to undertake further restructuring initiatives in the last half of 2016, and the expectation that these initiatives will reduce our cost structure moving forward; and


2016 revenue visibility and expectations that overall 2016 consolidated revenue will be lower than that obtained in 2015;


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, specifically:


decreased 2016 revenue and significantly lower 2016 adjusted EBITDA and adjusted EBITDA margin in 2016 compared to 2015 for the Industrial Group;


higher adjusted EBITDA and adjusted EBITDA margin in 2016 on lower 2016 revenues for the Buildings Group; and


lower 2016 revenue, adjusted EBITDA and adjusted EBITDA margin compared to 2015 for the Commercial Systems Group.


With respect to forward-looking information listed above and contained in this press release, we have made assumptions regarding, among other things:

  • The expected performance of the global and Canadian economies and the effects thereof on our businesses;
  • The continuation of challenging market conditions in Alberta due to the "lower-for-longer" oil price environment;
  • An increased percentage of our Industrial Group revenue coming from lower-risk cost-reimbursable MRO projects;
  • The ability of counterparties with whom we invest cash and equivalents to meet their obligations;
  • The impact of competition on our businesses;
  • The global demand for oil and natural gas, its impact on commodity prices and its related effect on capital investment projects in Western Canada; and
  • Government policies.

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:


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890