Aecon reports record second quarter and first half earnings



    
    -  Revenues up 31% to $338 million in the quarter
    -  Gross Margins up 84% to $32.3 million in the quarter
    -  Net income of $9.7 million in the quarter and $6.8 million in the half
       set new records
    -  2008 EPS target achieved 18 months early on trailing 12-month basis
    -  Backlog up 44% in the quarter to record $1.2 billion
    -  Outlook remains strong
    

    TORONTO, Aug. 7 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported
improved operating results for the second quarter of 2007 as revenues,
margins, operating profit and net income all improved over those reported a
year earlier. These improved results continue a trend that has emerged over
the past several quarters of significant year-over-year earnings growth,
reflecting the strong market conditions in Aecon's key sectors and reinforcing
the success of the strategic path Aecon adopted in 2005.

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

                                         Three Months         Six Months
                                         Ended June 30       Ended June 30
                                      ---------------------------------------
    $ millions                           2007      2006      2007      2006
                                         ----      ----      ----      ----

    Revenues                           $  338    $  259    $  580    $  459
    Gross margin                         32.3      17.6      51.2      24.0
    Operating profit (loss)              14.1       1.4      14.3      (6.6)
    Interest expense                      3.1       2.4       5.4       5.1
    Income taxes                          1.2       0.1       1.8       0.2
    Net income (loss) for the period      9.7      (1.0)      6.8     (11.9)
    Backlog - June 30                  $1,208    $  812   -------------------
                                      ------------------- -------------------
                                      -------------------
    

    Revenues in the second quarter of 2007 totalled $338 million, an increase
of more than 30% over the same period last year, as increases in the
Infrastructure, Industrial and Concessions segments offset a small decline in
the Buildings segment. Revenues in the first half of the year increased 26% to
$580 million.
    Gross margins (revenues less direct costs and expenses) increased by
$14.7 million in the quarter, bringing gross margins as a percentage of
revenues to 9.6%, up from 6.8% in the second quarter last year. Gross margins
over the first six months were 8.8% of revenues, up from 5.2% in 2006.
    Operating profit (income from operations before interest expense, income
taxes and non-controlling interests) grew to $14.1 million in the quarter, up
from $1.4 million in the second quarter of 2006, as improvements in the
Infrastructure, Industrial and Concessions segments offset a decline in the
Buildings segment. First half operating profit of $14.3 million was a
$20.9 million improvement over 2006.
    Net income reached a second quarter record of $9.7 million ($0.26 per
share basic/$0.24 diluted) from a loss of $1.0 million ($0.03 loss per share
basic and diluted) in 2006, bringing net income for the first six months to a
highest-ever $6.8 million ($0.18 per share basic and diluted). Net income for
the 12 months ended June 30, 2007 was a record $30.2 million on revenue of
$1.23 billion.
    Marketing, general and administrative expenses amounted to $15.5 million
in the quarter and $30.5 million in the first half, representing increases of
$1.7 million and $3.6 million compared to the same periods last year. The
increases are due largely to higher volumes, the expansion of operations in
Western Canada, higher information technology costs and higher
performance-related incentive costs. Notably, while the aggregate dollar
amount increased, MG&A as a percentage of revenues fell to 5.3% in the first
half from 5.8% last year.
    Depreciation and amortization expense of $6.3 million is $4.4 million
higher than last year as a result of the amortization of concession rights
related to the existing Quito airport.

    Outlook
    -------
    "The net income reported this quarter brings Aecon's earnings over the
past twelve months to a level in excess of the 75 cents per share target we
established for fiscal 2008," said John M. Beck, Chairman and CEO, Aecon Group
Inc. "Looking ahead, although Aecon may be required to begin tax effecting
earnings once again in 2008, I continue to believe that the growing backlog
and the ongoing strength of our core markets, especially in the energy and
transportation infrastructure sectors, bode well for continued pre-tax
earnings growth beyond 2007. We will now return to the practice of offering
directional guidance on expected market and performance trends rather than
specific EPS guidance."
    "The first half of 2007 was characterized by strong revenues, continued
margin improvement and significant backlog growth," said Scott Balfour,
President and CFO, Aecon Group Inc. "These results reinforce our commitment to
follow the strategic path we adopted in late 2005."

    Backlog and New Business Awards
    -------------------------------
    Backlog at June 30, 2007 reached a record $1.208 billion. Increases in
all segments drove backlog $371 million or 44% higher than at the beginning of
the quarter, and $396 million or 49% higher than at the same time last year.
Not included in backlog, but important to Aecon's activities, are the revenues
from Aecon's growing alliances and supplier-of-choice arrangements that do not
specify the amount of work to be carried out at any one time.
    Record new contract awards of $710 million in the quarter brought total
new contract awards in the first half of the year to $1.002 billion, a 44%
increase over the $694 million reported in the first half of 2006.

    Second Quarter Business Highlights
    ----------------------------------
    
    -  Aecon's second quarter results established a number of new second
       quarter and first half high water marks, including record revenues,
       record earnings, record contract awards and record backlog.

    -  On June 26, Aecon announced that financial close had been reached on
       an 18 km extension of the Cross Israel Highway. As part of the deal,
       Aecon was repaid approximately US$10 million of the subordinated debt
       it invested in the project in 1999, thereby reducing its carried
       investment from approximately $43 million to approximately $32 million
       (and retaining its 25% interest in the concession). Aecon also
       announced that it had sold its right to participate in the joint
       venture building the extension for approximately US$3.5 million.

    -  Average weekday traffic on the Cross Israel Highway in June 2007
       reached 90,000, an increase of 13.6% since June of last year.

    -  A total of 2 million passengers passed through the existing Quito
       International Airport in the first half of 2007, a higher than
       forecast 13.7% increase from the first half of last year.

    Segmented Results
    -----------------
    Aecon reports its results in four operating 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                 Three Months         Six Months
    ($ millions)                         Ended June 30       Ended June 30
                                      ------------------- -------------------
                                         2007      2006      2007      2006
                                         ----      ----      ----      ----

    Revenues                           $  162    $  108    $  257    $  164

    Segment operating profit (loss)       8.7       2.0       6.6      (2.5)
                                      ------------------- -------------------
    Return on revenue                     5.4%      1.9%      2.6%     (1.5)%

    Backlog - June 30                  $  531    $  451   -------------------
                                      ------------------- -------------------
                                      -------------------


    Revenues in the Infrastructure segment increased to $162 million in the
quarter from $108 million in the same period of 2006. The $53 million increase
can be attributed largely to power generation, roadbuilding and tunnelling
projects in Ontario, growing volumes of civil work in Alberta, and Aecon's
acquisition of The Karson Group in the first quarter of this year.
    The segment's operating profit of $8.7 million represents a $6.6 million
improvement over the same quarter of 2006 and stems from the general pattern
of rising revenues and improved margins in the segment.
    Backlog at the end of the quarter was $531 million, an $80 million
increase from the same time last year. New contract awards totaling
$373 million were received in the first half of the year, a decline of
$125 million compared to the first half of 2006. The year-over-year decline
was due to the addition in the second quarter of 2006 of $133 million relating
to construction of the new Quito Airport.

    -  Buildings

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


    Financial Highlights                 Three Months         Six Months
    ($ millions)                         Ended June 30       Ended June 30
                                      ------------------- -------------------
                                         2007      2006      2007      2006
                                         ----      ----      ----      ----

    Revenues                           $   79    $   80    $  142    $  168

    Segment operating profit (loss)      (1.0)      1.2      (1.2)      0.7
                                      ------------------- -------------------
    Return on revenue                    (1.3%)     1.5%     (0.9)%     0.4%

    Backlog - June 30                  $  349    $  178   -------------------
                                      ------------------- -------------------
                                      -------------------


    Second quarter revenues in the Buildings segment were $79 million,
$1 million lower than in the same quarter last year. The small decline was
largely the result of lower revenues in the Greater Toronto Area (GTA),
largely offset by revenue growth in other regions.
    Segment operating loss of $1.0 million in the quarter compares to an
operating profit of $1.2 million in the second quarter of 2006. The decline is
largely due to the decline in GTA volumes as well as $0.8 million of costs
associated with a restructuring undertaken to improve Aecon's competitive
positioning in the GTA Buildings market.
    Notably, backlog of $349 million is $172 million higher than at the same
time last year, due largely to $259 million in new project awards this
quarter. This strengthening of segment backlog, currently higher than at any
time since early 2005, is a positive trend that is expected to continue in
coming quarters.

    -  Industrial

    Industrial operations include all of Aecon's industrial manufacturing and
construction activities including industrial construction, fabrication of
specialty pipe, assembly of custom module units and the design and manufacture
of Once Through Steam Generators.


    Financial Highlights                 Three Months         Six Months
    ($ millions)                         Ended June 30       Ended June 30
                                      ------------------- -------------------
                                         2007      2006      2007      2006
                                         ----      ----      ----      ----

    Revenues                           $   93    $   68    $  167    $  121

    Segment operating profit              7.0       2.1       9.9       2.5
                                      ------------------- -------------------
    Return on revenue                     7.5%      3.1%      6.0%      2.1%

    Backlog - June 30                  $  330    $  183   -------------------
                                      ------------------- -------------------
                                      -------------------
    

    Industrial segment revenues totalled $93 million in the quarter, a
$25 million increase over the second quarter of 2006. This increase reflects
revenue growth in all operating units, with construction operations in Ontario
posting the largest increase.
    Segment operating profit of $7.0 million in the quarter represents a
$4.9 million improvement over the same quarter last year. Innovative Steam
Technologies (IST) made the largest gain, with a $2.5 million improvement over
the results reported in the second quarter of 2006.
    Backlog of $330 million in the Industrial segment at June 30 is
$147 million higher than at the same time last year, due largely to the
significant growth in IST's backlog, which is now at its highest level since
2001. New contract awards of $311 million in the first half were $178 million
higher than in the same period of 2006.

    - 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 investments in transportation infrastructure
concessions, including the Cross Israel Toll Highway and Quito International
Airport concession companies.

    
    Financial Highlights                 Three Months         Six Months
    $ millions                           Ended June 30       Ended June 30
                                      ------------------- -------------------
                                         2007      2006      2007      2006
                                         ----      ----      ----      ----

    Revenues                           $   14    $    5    $   27    $   11

    Segment operating profit (loss)       1.2      (1.2)      2.6      (1.9)
                                      ------------------- -------------------

    Return on revenue                  $  9.1%   $(24.2%)     9.6 %   (18.0)%
                                      ------------------- -------------------
                                      ------------------- -------------------
    

    Revenues in the Concessions segment were $14 million in the quarter, a $9
million increase compared to the same quarter of 2006. The majority of the
revenue increase arose from operating the existing Quito airport, which
reported no revenues in the second quarter of 2006 and $8 million this year.
    The segment operating profit of $1.2 million was an improvement of $2.5
million compared to the same quarter last year, largely due to contributions
from operations of the existing Quito Airport.

    - Corporate and Other

    Net Corporate expenses (before interest income and corporate allocations
to the segments) were $2.4 million in the quarter compared to $3.3 million in
2006, due primarily to the impact of foreign exchange gains.

    Consolidated Results

    The Consolidated Results for the three months and six months ended
June 30, 2007 and 2006 are available at the end of this News Release.

    
    Balance Sheet Highlights

    -------------------------------------------------------------------------
    (thousands of dollars)                      June 30, 2007  Dec. 31, 2006
                                                -------------  -------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash, cash equivalents, restricted cash
     and restricted term deposits and
     marketable securities                        $    74,630    $    78,528
    -------------------------------------------------------------------------
    Other current assets                              410,247        372,839
    -------------------------------------------------------------------------
    Property, plant and equipment                      83,343         53,348
    -------------------------------------------------------------------------
    Other long-term assets                            205,166        211,572
    -------------------------------------------------------------------------
    Total Assets                                      773,386        716,287
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Current liabilities                           $   350,029    $   330,167
    -------------------------------------------------------------------------
    Long-term debt                                    121,036         81,120
    -------------------------------------------------------------------------
    Other long-term liabilities                       144,767        151,397
    -------------------------------------------------------------------------
    Shareholders' equity                              157,554        153,603
    -------------------------------------------------------------------------
    Total Liabilities and Shareholders'
     Equity                                           773,386        716,287
    -------------------------------------------------------------------------



    Summary of Cash Flows

                                          Consolidated   Cash Flows Excluding
                                           Cash Flows          Quiport JV
                                      ------------------- -------------------
                                        Six Months Ended    Six Months Ended
                                             June 30             June 30
                                      ------------------- -------------------
    $ millions                           2007      2006      2007      2006
                                         ----      ----      ----      ----
    Cash provided by (used in):

    Operating activities               $  1.4    $(25.3)   $ (4.2)   $(19.7)

    Investing activities                (40.2)     (9.3)    (29.2)     (6.6)

    Financing activities                 29.1      57.2      20.0      13.2
                                      ------------------- -------------------
    Increase (decrease) in cash
     and cash equivalents                (9.7)     22.6     (13.4)    (13.0)
                                      ------------------- -------------------
    

    Conference Call

    A conference call has been scheduled for Wednesday, August 8, 2007 at
10:30 a.m. ET to discuss Aecon's second quarter and first six months financial
results. Participants should dial 416-641-6451 or 1-800-215-0816 at least
10 minutes prior to the conference time.
    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, August 17, 2007.
The pass code is 21345992 followed by the number sign.

    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. 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, 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
    June 30, 2007 and 2006
    (in thousands of dollars, except per share amounts) (unaudited)

                                                      2007           2006
                                                -------------- --------------

    Revenues                                     $    338,271   $    258,739

    Costs and expenses                               (305,966)      (241,149)
                                                -------------- --------------

                                                       32,305         17,590
                                                -------------- --------------
    Marketing, general and administrative
     expenses                                         (15,495)       (13,802)

    Foreign exchange losses                              (426)        (1,037)

    Gain on sale of assets                              3,399             80

    Depreciation and amortization                      (6,336)        (1,956)

    Interest expense                                   (3,060)        (2,356)

    Interest income                                       678            551
                                                -------------- --------------

                                                      (21,240)       (18,520)
                                                -------------- --------------
    Income (loss) before income taxes and
     non-controlling interests                         11,065           (930)
                                                -------------- --------------
    Income tax (expense) recovery
    Current                                            (1,875)           (58)
    Future                                                637              -
                                                -------------- --------------

                                                       (1,238)           (58)
                                                -------------- --------------

    Income (loss) before non-controlling
     interests                                          9,827           (988)

    Non-controlling interests                             (96)             -
                                                -------------- --------------

    Net income (loss) for the period             $      9,731   $       (988)
                                                -------------- --------------
                                                -------------- --------------

    Net earnings (loss) per share
    Basic                                        $       0.26   $      (0.03)
    Diluted                                      $       0.24   $      (0.03)

    Average number of shares outstanding
    Basic                                          37,035,381     36,664,586
    Diluted                                        46,907,228     38,073,526



    Consolidated Statements of Operations for the six months ended
    June 30, 2007 and 2006
    (in thousands of dollars, except per share amounts) (unaudited)

                                                      2007           2006
                                                -------------- --------------

    Revenues                                     $    580,056   $    459,314

    Costs and expenses                               (528,842)      (435,347)
                                                -------------- --------------

                                                       51,214         23,967
                                                -------------- --------------

    Marketing, general and administrative
     expenses                                         (30,455)       (26,811)

    Foreign exchange losses                              (561)          (994)

    Gain on sale of assets                              3,387             77

    Depreciation and amortization                     (11,191)        (3,796)

    Interest expense                                   (5,437)        (5,085)

    Interest Income                                     1,859            905
                                                -------------- --------------

                                                      (42,398)       (35,704)
                                                -------------- --------------
    Income (loss) before income taxes and
     non-controlling interests                          8,816        (11,737)
                                                -------------- --------------
    Income tax (expense) recovery
    Current                                            (2,956)          (198)
    Future                                              1,149              -
                                                -------------- --------------

                                                       (1,807)          (198)
                                                -------------- --------------
    Income (loss) before non-controlling
     interests                                          7,009        (11,935)

    Non-controlling interests                            (252)             -
                                                -------------- --------------

    Net income (loss) for the period             $      6,757   $    (11,935)
                                                -------------- --------------
                                                -------------- --------------
    Net earnings (loss) per share
    Basic                                        $       0.18   $      (0.35)
    Diluted                                      $       0.18   $      (0.35)

    Average number of shares outstanding
    Basic                                          36,786,298     33,755,034
    Diluted                                        46,594,895     36,072,150
    

    %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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