pre-tax earnings double from year ago
Toronto
, Ontario
– October 28, 2008
: Aecon Group Inc. (TSX: ARE) today reported record third quarter results as revenues, margins and net income all increased over those reported a year earlier.
Revenue, Operating Results and Net Income
|
Revenue, Operating Results and Net Income
|
| |
|
Three Months Ended September 30
|
Nine Months Ended
September 30
|
|
$ millions, except per share amounts
|
|
2008
|
|
2007
|
|
|
|
2008
|
|
2007
|
| |
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
535
|
$
|
430
|
|
|
$
|
1,274
|
$
|
1,010
|
|
Gross margin
|
|
68.7
|
|
42.7
|
|
|
|
138.9
|
|
93.9
|
|
EBITDA
|
|
44.4
|
|
26.5
|
|
|
|
81.8
|
|
51.9
|
|
Operating profit
|
|
37.3
|
|
20.3
|
|
|
|
62.5
|
|
34.6
|
|
Interest expense
|
|
(1.6)
|
|
(3.0)
|
|
|
|
(5.9)
|
|
(8.4)
|
|
Earnings before taxes
|
|
35.7
|
|
17.4
|
|
|
|
56.5
|
|
26.2
|
|
Income taxes
|
|
(12.2)
|
|
1.8
|
|
|
|
(16.4)
|
|
-
|
|
Net income
|
|
23.1
|
|
19.0
|
|
|
|
39.0
|
|
25.8
|
|
Earnings per diluted share
|
$
|
0.45
|
$
|
0.44
|
|
|
$
|
0.80
|
$
|
0.66
|
|
Backlog - September 30
|
$
|
1,499
|
$
|
1,272
|
|
|
|
|
|
|
Third quarter revenues reached a record $535 million, a 24% increase from last year, as increases in the Infrastructure, Industrial and Concessions segments offset a small decline in the Buildings segment.
Gross margin (representing revenues less direct costs and expenses) increased to $68.7 million (or 12.8% of revenues) in the third quarter of 2008 from $42.7 million (or 9.9% of revenues) in the same quarter of 2007.
EBITDA (representing income from operations before interest expense, income taxes, depreciation, amortization and non-controlling interests) grew to $44.4 million in the quarter, an increase of 67% over the $26.5 million recorded in the third quarter of 2007.
Operating profit (representing income from operations before interest expense, income taxes and non-controlling interests) increased to $37.3 million from $20.3 million in the same quarter last year, an increase of 83%, as increases in the Infrastructure, Industrial and Concessions segments offset a decline in the Buildings segment.
Earnings before taxes (representing income from operations before income taxes and non-controlling interests) reached $35.7 million in the quarter, more than doubling the $17.4 million earned in the same quarter of 2007.
Net income in the quarter grew to a record $23.1 million ($0.45 per diluted share) from $19.0 million ($0.44 per diluted share) in the same quarter last year. Net income of $39.0 million in the first nine months of 2008 ($0.80 per diluted share) represents a 51% increase from the $25.8 million ($0.66 per diluted share) reported in the same period of 2007.
Outlook
“The fundamental need to upgrade Canada’s transportation, energy and social infrastructure is as real today as it has ever been, notwithstanding the current economic instability,” said John M. Beck, Chairman and CEO, Aecon Group Inc. “I believe Aecon’s record backlog and the relative durability of our core markets bode well for continued strong financial performance.
“Notwithstanding the current turmoil in our equity and debt markets, Aecon’s outlook remains strong,” said Scott Balfour, President and CFO, Aecon Group Inc. “We believe that Aecon’s diverse market capabilities, substantial backlog and strong balance sheet will serve us well.”
Backlog and New Business Awards
Backlog at September 30, 2008 reached a record $1.5 billion, $227 million (or 18%) higher than the backlog reported at same time last year, as backlog growth in the Infrastructure and Buildings segments offset a decrease in the Industrial segment.
Not included in backlog, but important to Aecon’s prospects due to the significant volumes involved, are the expected revenues from Aecon’s growing alliances and supplier-of-choice arrangements where the amount of work to be carried out is not specified.
New contract awards of $555 million were booked in the third quarter, a 12% increase from the $495 million reported in the third quarter of 2007.
Third Quarter Business Highlights
·
Net income of $23.1 million in the quarter made this the most profitable quarter in Aecon’s history.
·
During the quarter, Aecon announced its largest roadbuilding contract award ever, a $105 million contract to reconstruct and widen a section of Highway 401 in southern Ontario.
·
Following the end of the quarter, Aecon was recognized as one of Canada’s Top 100 Employers by Maclean’s magazine.
·
Average weekday traffic on the Cross Israel Highway in September 2008 surpassed 103,000, a 10% increase over September 2007.
·
Nearly 3.5 million passengers passed through the existing Quito International Airport in the first nine months of 2008, a 4% increase from the same period last year.
Segmented Results
Aecon reports its results in four segments: Infrastructure, Buildings, Industrial and Concessions.
Ø
Infrastructure
The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities construction.
|
Financial Highlights
(1)(2)
($ millions)
|
Three Months
Ended September 30
|
|
Nine Months
Ended September 30
|
|
| |
|
2008
|
|
2007
|
|
|
|
|
2008
|
|
2007
|
|
|
|
Revenues
|
$
|
238
|
$
|
225
|
|
|
|
$
|
481
|
$
|
482
|
|
|
|
Segment operating profit
|
|
16.8
|
|
12.0
|
|
|
|
|
14.7
|
|
18.6
|
|
|
|
Return on revenue
|
|
7.1%
|
|
5.3%
|
|
|
|
|
3.0%
|
|
3.9%
|
|
|
|
Backlog – September 30
|
$
|
581
|
$
|
435
|
|
|
|
|
|
|
|
|
|
(1) Segment operating profit or loss represents the profit or loss from operations, before interest expense, income taxes, non-controlling interests, and corporate allocations of overhead costs and capital charges.
(2) Segment return on revenue is calculated as segment operating profit (loss) as a percentage of revenues.
In the Infrastructure segment, third quarter revenues of $238 million were $12 million (or 6%) higher than in the third quarter of 2007, as revenues increased in each of roadbuilding, utilities and heavy civil operations. The roadbuilding and heavy civil increases were primarily concentrated in Alberta and on the Quito Airport project, which offset decreases in Ontario.
Segment operating profit of $16.8 million in the third quarter represents a $4.9 million (or 41%) increase over the same quarter last year, with the largest increase occurring in heavy civil operations. The third quarter heavy civil results benefited from profit recognition on the construction of the Quito International Airport, which reached 30% completion in the quarter, whereas no profits were recognized on this project in the same period last year. In addition, the operating results in the third quarter of 2007 were negatively impacted by risk reserves taken on some previously completed large projects. Quarter-over-quarter operating profits also increased in utilities operations, while lower operating profits were reported by the segment’s roadbuilding operations.
Infrastructure segment backlog at September 30 was $581 million, a 34% increase from the same time last year, primarily as a result of higher backlog in the roadbuilding operations. New contract awards totalled $218 million, a 76% increase from the $124 million awarded in the same quarter last year.
Ø
Buildings
The Buildings segment includes all aspects of Aecon’s commercial, institutional and multi-unit residential building construction and renovation activities.
|
Financial Highlights
($ millions)
|
Three Months
Ended September 30
|
|
Nine Months
Ended September 30
|
|
| |
|
2008
|
|
2007
|
|
|
|
|
2008
|
|
2007
|
|
|
|
Revenues
|
$
|
109
|
$
|
113
|
|
|
|
$
|
327
|
$
|
255
|
|
|
|
Segment operating profit (loss)
|
|
(0.9)
|
|
2.4
|
|
|
|
|
1.4
|
|
1.2
|
|
|
|
Return on revenue
|
|
(0.8)%
|
|
2.1%
|
|
|
|
|
0.4%
|
|
0.5%
|
|
|
|
Backlog – September 30
|
$
|
618
|
$
|
446
|
|
|
|
|
|
|
|
|
|
Third quarter revenues of $109 million in the Buildings segment were $4 million, or 4%, lower than in the same period of 2007. The decrease was due primarily to a $26 million decrease in the segment’s Ottawa operations, largely offset by an $18 million increase in revenues from the Toronto operations. The Ottawa decrease is expected to be temporary, as two new projects awarded in the quarter are in the process of ramping-up to full construction activity.
Segment operating loss of $0.9 million in the third quarter of 2008 compares with a profit of $2.4 million in the same quarter last year. Most of the quarter-over-quarter decline in operating profits occurred in Montreal, where profits decreased by $3.3 million due to profit writedowns on some projects and severance costs associated with a restructuring of this operation.
Backlog in the Buildings segment reached a record $618 million at the end of the third quarter, $172 million (or 39%) higher than at the same time last year. New contract awards totalled $231 million in the quarter, up from $209 million in the same quarter last year.
Ø
Industrial
Industrial operations include all of Aecon’s industrial manufacturing and construction activities from in-plant construction to the fabrication of specialty pipe and its assembly into modules, and the design and manufacture of Once Through Steam Generators.
|
Financial Highlights
($ millions)
|
Three Months
Ended September 30
|
|
Nine Months
Ended September 30
|
|
| |
|
2008
|
|
2007
|
|
|
|
|
2008
|
|
2007
|
|
|
|
Revenues
|
$
|
172
|
$
|
86
|
|
|
|
$
|
425
|
$
|
253
|
|
|
|
Segment operating profit
|
|
21.2
|
|
7.7
|
|
|
|
|
45.8
|
|
17.7
|
|
|
|
Return on revenue
|
|
12.3%
|
|
9.0%
|
|
|
|
|
10.8%
|
|
7.0%
|
|
|
|
Backlog – September 30
|
$
|
301
|
$
|
391
|
|
|
|
|
|
|
|
|
|
Industrial segment revenues increased 100% to $172 million in the third quarter of 2008, an $86 million increase over the same period in 2007. While all operating units reported higher revenues, the segment’s construction operations in Ontario had the largest quarter-over-quarter improvement, due primarily to increases in the power, nuclear and gas sectors.
In the third quarter, the Industrial segment generated an operating profit of $21.2 million, a 175% increase over the $7.7 million reported in the same quarter of 2007. Most of the improvement occurred in Western Canada operations (up $7.0 million) and Ontario Construction operations (up $6.4 million).
Segment backlog of $301 million was $89 million lower than at the same time last year, with decreases in Ontario Construction operations and Western Canada operations offsetting increases in the IST and Fabrication backlog. New contract awards totalled $89 million in the quarter, down from $147 million in the same quarter last year.
Ø
Concessions
The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures. This segment focuses primarily on the operations, management, maintenance and enhancement of investments in transportation infrastructure concessions, including the Cross Israel Toll Highway and Quito International Airport concession companies.
|
Financial Highlights
($ millions)
|
Three Months
Ended September 30
|
|
Nine Months
Ended September 30
|
|
| |
|
2008
|
|
2007
|
|
|
|
|
2008
|
|
2007
|
|
|
|
Revenues
|
$
|
16
|
$
|
15
|
|
|
|
$
|
47
|
$
|
42
|
|
|
|
Segment operating profit
|
|
3.3
|
|
1.2
|
|
|
|
|
7.1
|
|
3.8
|
|
|
|
Return on revenue
|
|
20.6%
|
|
7.7%
|
|
|
|
|
15.3%
|
|
8.9%
|
|
|
Concessions revenues of $16 million in the third quarter were up $1 million, or 8%, compared to the same period in 2007. The majority of the increase came from Aecon’s proportionate share of the revenues from operating the Cross Israel Highway, which is being carried-out on a fee for service basis by a company in which Aecon holds a 30.6% interest.
Segment operating profit of $3.3 million in the third quarter increased by $2.2 million or 188% from the same period in 2007, with increases from both the Quito airport concessionaire and Aecon’s interest in the Operator of the Cross Israel Highway.
While Aecon’s investment in the Cross Israel Highway concession continues to demonstrate value, this value will not be reflected in earnings until a dividend is received or a portion of the investment is sold. As such, even though the Cross Israel Highway is performing well and is generating strong operating cash flow, Aecon has not reported any revenues or profits from this investment.
Aecon does not include in its reported backlog potential revenues from operations management contracts and concession agreements. As such, while Aecon expects future revenues from its concession assets, no concession backlog is reported at September 30.
Ø
Corporate and Other
Marketing, general and administrative expenses increased in the quarter by $0.7 million over the same quarter last year.
Consolidated Results
The Consolidated Results for the three months and nine months ended September 30, 2008 and 2007 are available at the end of this News Release.
Balance Sheet Highlights
|
Balance Sheet Highlights
|
|
(thousands of dollars)
|
|
Sept. 30, 2008
|
|
Dec. 31, 2007
|
| |
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
$
|
252,381
|
$
|
169,234
|
|
Other current assets
|
|
517,180
|
|
434,015
|
|
Property, plant and equipment
|
|
96,054
|
|
97,105
|
|
Other long-term assets
|
|
233,036
|
|
210,298
|
|
Total Assets
|
$
|
1,098,651
|
$
|
910,652
|
| |
|
|
|
|
|
Current liabilities
|
$
|
510,566
|
$
|
439,984
|
|
Long-term debt
|
|
142,877
|
|
132,710
|
|
Other long-term liabilities
|
|
88,180
|
|
112,549
|
|
Shareholders’ equity
|
|
357,028
|
|
225,409
|
|
Total Liabilities and Shareholders’ Equity
|
$
|
1,098,651
|
$
|
910,652
|
Conference Call
A conference call has been scheduled for Wednesday, October 29, 2008 at 10:30 a.m. ET to discuss Aecon’s third quarter and nine months financial results. Participants should dial 416-620-2419 or 1-800-215-0816 at
least 10 minutes prior to the conference time. The reservation number is 21397554.
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, November
5, 2008. The reservation number is 21397554.
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. Aecon is pleased to be recognized as one of the 50 Best Employers in Canada as published by Report on Business Magazine.
The information in this news release includes certain forward-looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties which 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, 2007 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 Income for the three months ended September 30, 2008 and 2007
(in thousands of dollars, except share and per share amounts) (unaudited)
|
Consolidated Statements of Income for the three months ended September 30, 2008 and 2007
|
| |
|
2008
|
|
2007
|
| |
|
|
|
|
|
Revenues
|
$
|
534,665
|
$
|
430,371
|
| |
|
|
|
|
|
Direct costs and expenses
|
|
(465,996)
|
|
(387,657)
|
| |
|
|
|
|
| |
|
68,669
|
|
42,714
|
| |
|
|
|
|
| |
|
|
|
|
|
Marketing, general and administrative expenses
|
|
(26,060)
|
|
(16,861)
|
| |
|
|
|
|
|
Foreign exchange losses
|
|
(267)
|
|
(1,016)
|
| |
|
|
|
|
|
Gain on sale of assets
|
|
195
|
|
193
|
| |
|
|
|
|
|
Depreciation and amortization
|
|
(7,079)
|
|
(6,149)
|
| |
|
|
|
|
|
Interest
expense
|
|
(1,560)
|
|
(2,953)
|
| |
|
|
|
|
|
Interest income
|
|
1,828
|
|
1,453
|
| |
|
|
|
|
| |
|
(32,943)
|
|
(25,333)
|
| |
|
|
|
|
|
Income before income taxes and
non-controlling interests
|
|
35,726
|
|
17,381
|
| |
|
|
|
|
|
Income tax (expense) recovery
|
|
|
|
|
|
Current
|
|
(837)
|
|
2,064
|
|
Future
|
|
(11,314)
|
|
(263)
|
| |
|
|
|
|
| |
|
(12,151)
|
|
1,801
|
| |
|
|
|
|
|
Income before non-controlling interests
|
|
23,575
|
|
19,182
|
| |
|
|
|
|
|
Non-controlling interests
|
|
(495)
|
|
(147)
|
| |
|
|
|
|
|
Net income for the period
|
$
|
23,080
|
$
|
19,035
|
| |
|
|
|
|
|
Net earnings per share
|
|
|
|
|
|
Basic
|
$
|
0.46
|
$
|
0.51
|
|
Diluted
|
$
|
0.45
|
$
|
0.44
|
| |
|
|
|
|
|
Average number of shares outstanding
|
|
|
|
|
|
Basic
|
|
50,157,924
|
|
37,120,401
|
|
Diluted
|
|
51,051,438
|
|
47,021,102
|
| |
|
|
|
|