Quarterly Revenue up 27.5%, EBITDA up 28.2%, Backlog of $1.9B
CALGARY, Nov. 5, 2014 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the third quarter of 2014 and declared a quarterly dividend of $0.12 per common share.
|Three months ended||Nine months ended|
|Sept 30||Sept 30|
|$millions, except percentages and per share amounts||2014||2013(3)||2014||2013(3)|
|Contract income margin||8.2%||9.8%||8.9%||9.7%|
|Net earnings from continuing operations||2.8||1.0||6.0||1.2|
|Net (loss) earnings from discontinued operations||(15.7)||1.6||(19.5)||0.6|
|Net (loss) earnings||(12.9)||2.6||(13.5)||1.8|
|Earnings (loss) per common share|
|Basic from continuing operations||0.11||0.04||0.24||0.05|
|Basic (loss) earnings per share||(0.52)||0.10||(0.54)||0.07|
|Diluted from continuing operations||0.11||0.04||0.24||0.05|
|Diluted (loss) earnings per share||(0.52)||0.10||(0.54)||0.07|
|Dividends declared per share||0.12||0.12||0.36||0.36|
|$millions||Sept. 30, 2014||Dec. 31, 2013|
|Long-term debt (excluding current portion)||1.3||50.3|
|Convertible debenture (excluding equity portion)||154.7||81.9|
|Notes:|| (1) The 2010 convertible debentures are presented as a current liability as at September 30, 2014; whereas, they
were presented as a non-current liability of $81.9 million as at December 31, 2013.
| (2) If the 2010 convertible debentures were excluded from working capital, adjusted September 30, 2014 working
capital would have been $141.2 million (December 31, 2013 - $84.9 million).
| (3) Three and nine month ended September 30, 2013 results have been restated to reflect Broda as discontinued
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 Q3 2014 Management's Discussion and Analysis.
Third Quarter ("Q3") 2014 Overview
- On September 1, 2014, the Company divested of Broda Construction Inc. ("Broda") for estimated gross cash proceeds of $39.4 million, subject to finalization of purchase price adjustments. The sale of Broda, a non-core business asset, has reduced indebtedness under our revolving credit facility, while also enhancing our ability to generate free cash flow going forward. Broda was formerly included in the Industrial Group results. Current and historical Broda results have been restated to present the effect of discontinued operations.
- Third quarter consolidated contract revenue increased 27.5% to $350.4 million, from $274.8 million in the third quarter of 2013.
- Buildings Group revenue increased by 36.1% to $181.7 million, reflecting a strong backlog of work, increased commercial and institutional activity in B.C., Alberta and Manitoba and increased activity in the group's industrial buildings branch.
- Industrial Group revenue increased by 30.8% to $116.0 million, reflecting increased activity levels in Alberta's oil sands and the group's growing volume of maintenance, repair and operations ("MRO") work.
- Commercial Systems Group revenue increased by 6.4% to $62.8 million, supported by the start-up of a number of significant new projects in Alberta.
- Consolidated contract income increased 7.4% to $28.9 million. Consolidated contract income margin declined to 8.2% from 9.8%, primarily reflecting losses on certain Buildings Group industrial site projects.
- Third quarter EBITDA increased 28.2% to $10.9 million, from $8.5 million in Q3 2013. The year-over-year improvement reflects increased revenue in all business groups.
- Third quarter net earnings from continuing operations increased to $2.8 million (diluted earnings per share of $0.11), from $1.0 million (diluted earnings per share of $0.04) in the third quarter of 2013, driven primarily by higher revenue and contract income. As anticipated, the Company recorded a third quarter net loss of $12.9 million (diluted loss per share of $0.52), compared to net income of $2.6 million (diluted earnings per share of $0.10) in Q3 2013, primarily reflecting the non-cash loss of $16.4 million incurred on the sale of Broda.
- Backlog of $1.9 billion reflects $183.7 million in new contract awards and net increases in project scope awarded during the quarter. Backlog is made up primarily of lower-risk contracts including 67% construction management work and 19% cost-plus arrangements. Tendered (hard-bid work) represents approximately 14% of the backlog.
- In September, gross proceeds of $80.5 million ($76.7 million net of transaction costs) were raised through the issue of 6% convertible unsecured subordinated debentures due on December 31, 2019. The 2014 convertible debentures have provided the balance of capital to repay the $86.3 million 2010 convertible debentures that come due in June 2015.
- As at September 30, 2014, the Company was in full compliance with its long-term debt covenants, had available cash of $71.3 million and additional borrowing capacity of approximately $119.4 million.
- Stuart Olson's Board of Directors declared a third quarter dividend of $0.12 per common share. The dividend will be paid on January 15, 2015 to shareholders of record on December 31, 2014. The Company has a dividend reinvestment plan in place; details are available on Stuart Olson's website (www.stuartolson.com).
"We continued to optimize our asset utilization in the third quarter with the $39.4 million divestiture of Broda, a non-core and capital-intensive business unit. We also completed a successful $80.5 million convertible debenture issue during the period," said David LeMay, President and CEO of Stuart Olson. "We now have a stronger balance sheet and capital structure supporting us as we execute the strategies to grow our business."
"Our third quarter consolidated results were in line with our expectations thanks to strong performance from our Industrial Group and steady performance from the Commercial Systems Group," added Mr. LeMay. "While we did not achieve the third quarter margin growth we had targeted in our Buildings Group due to losses on certain fixed-price industrial site projects, execution on virtually all other Buildings Group projects continues to strengthen. Our focus going forward will be on markets and project opportunities that provide the best line of sight to consistent and profitable results."
Western Canada continues to lead the country in economic growth, providing a supportive base for the region's commercial and institutional construction activity. While recent oil price volatility and delays surrounding final investment decisions for major LNG projects in B.C. could potentially cool near-term momentum in industrial markets, the medium-to-longer term outlook remains positive with growing MRO spending and a significant number of construction projects planned in the oil sands, conventional oil and gas, pipeline, mining, LNG, power generation and transportation sectors.
With a large backlog predominantly comprised of lower-risk construction management and cost-plus contracts, the Company has excellent revenue visibility going forward. On a full-year basis, management continues to anticipate that 2014 revenue will be significantly higher than in 2013, while EBITDA margin is expected to be consistent with the level achieved in 2013.
Stuart Olson's outlook for its three business groups is as follows:
- The Building Group is on track to generate 2014 revenues that significantly exceed comparative amounts for 2013. EBITDA margin is expected to be slightly higher on a full-year basis, reflecting the improvement in margins in our traditional markets, partially offset by losses incurred on industrial site projects in the current quarter.
- Revenue from the Industrial Group is expected to exceed 2013 levels, and combined with higher EBITDA margins, is expected to generate increased EBITDA compared to 2013.
- The Commercial Systems Group anticipates year-over-year revenue growth in 2014, along with marginally lower EBITDA margins as a result of project mix and timing.
Going forward, the Company will continue to focus on implementing its business strategy and generating predictable and profitable results. Acquisition opportunities continue to be reviewed, particularly those that support the Industrial Group's objective of becoming a self-performing general contractor.
Stuart Olson will hold a conference call and webcast to discuss its third quarter 2014 results tomorrow, November 6, 2014 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 www.stuartolson.com. 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 Friday, November 28, 2014, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 692279. The public is invited to listen to the live conference call 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 common shares, and Stuart Olson's 2010 and 2014 convertible debentures are listed on the Toronto Stock Exchange under the symbols "SOX", "SOX.DB" and "SOX.DB.A", respectively. www.stuartolson.com
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 within the section entitled "Outlook" pertaining to expected industry growth, margin growth or maintenance, project risk, visibility on revenue growth and EBITDA margin stability, project status, project fees and with respect to industrial-focused acquisition opportunities. 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 www.sedar.com. 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:
President and Chief Executive Officer
Stuart Olson Inc.
Email: [email protected]
Executive Vice President and Chief Financial Officer
Stuart Olson Inc.
Email: [email protected]