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Aecon reports full year results for 2012

Mar 12, 2013

Toronto, Ontario – March 12, 2013: Aecon Group Inc. (TSX: ARE) today reported results for the fourth quarter and full year 2012 showing margin trends continued to be positive while revenue in 2012 was slightly higher than the same period a year ago. 

 “We are pleased to have made significant improvements in our financial performance through the course of 2012 and remain focused on execution and a disciplined approach in working toward our target of 9 per cent EBITDA margin in 2015.  The steady progress that we are making particularly reflects improved volume and margins in our mining operations as well as increased contributions from our Industrial business,” said John M. Beck, Chairman and Chief Executive Officer.  “We enter 2013 with confidence in our three strategic core markets: infrastructure, energy and mining.”

HIGHLIGHTS

  • Ø Due to higher margins, gross profit for the year ended December 31, 2012, increased by $40.9 million to $315.0 million on revenues of $2,946.8 million compared to $274.1 million on revenues of $2,896.2 million in 2011.
  • Ø Adjusted EBITDA (excluding gains on sale of assets and investments) increased by 17 per cent to $172.4 million for the year ($147.2 million in 2011) due primarily to improved margins (adjusted EBITDA margin of 5.9 per cent in 2012 versus 5.1 per cent in 2011). 
  • Ø Adjusted profit attributable to shareholders (excluding fair value gain on convertible debentures) of $74.8 million ($1.18 per diluted share) for 2012 was recorded compared to $54.5 million ($0.84 per diluted share) in 2011. 
  • Ø Backlog of $2.43 billion at year end 2012 versus $2.39 billion in 2011. 
  • Ø Subsequent to year end, Aecon announced that the new Quito International Airport successfully commenced commercial flight operations.
  • Ø Annual dividend is increased to $0.32 per share ($0.08 per quarter) from $0.28 per share ($0.07 per quarter). 

CONSOLIDATED FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Year ended

 

 

 

$millions (except per share amounts) (1)

 

December 31

 

 

December 31

 

 

 

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 948.7 

 

$

 790.3 

 

$

 2,946.8 

 

$

 2,896.2 

 

 

 

Gross profit

 

 110.4 

 

 

 112.7 

 

 

 315.0 

 

 

 274.1 

 

 

 

Marketing, general and administrative expenses

 

 (38.5)

 

 

 (41.6)

 

 

 (157.2)

 

 

 (138.8)

 

 

 

Income from construction projects accounted for using the equity method

 

 5.8 

 

 

 3.7 

 

 

 14.4 

 

 

 14.1 

 

 

 

Foreign exchange gains

 

 0.3 

 

 

 0.2 

 

 

 0.2 

 

 

 0.3 

 

 

 

Gain on sale of assets and investments

 

 0.1 

 

 

 1.0 

 

 

 0.9 

 

 

 15.9 

 

 

 

Other gains (losses)

 

 - 

 

 

 (2.5)

 

 

 - 

 

 

 (2.5)

 

 

 

EBITDA(2)

 

 78.1 

 

 

 73.6 

 

 

 173.3 

 

 

 163.1 

 

 

 

Depreciation and amortization

 

 (17.8)

 

 

 (16.8)

 

 

 (63.6)

 

 

 (62.5)

 

 

 

Operating profit(3)

 

 60.3 

 

 

 56.8 

 

 

 109.8 

 

 

 100.5 

 

 

 

Financing expense, net

 

 (5.1)

 

 

 (9.8)

 

 

 (27.1)

 

 

 (31.2)

 

 

 

Fair value gain on convertible debentures

 

 3.9 

 

 

 (0.3)

 

 

 4.3 

 

 

 4.3 

 

 

 

Profit before income taxes

 

 59.1 

 

 

 46.7 

 

 

 86.9 

 

 

 73.6 

 

 

 

Income tax expense

 

 (0.6)

 

 

 (9.8)

 

 

 (5.9)

 

 

 (11.4)

 

 

 

Profit attributable to non-controlling interests

 

 (2.1)

 

 

 (0.3)

 

 

 (3.0)

 

 

 (4.6)

 

 

 

Profit attributable to shareholders

$

 56.4 

 

$

 36.7 

 

$

 78.0 

 

$

 57.6 

 

 

 

Adjusted profit attributable to shareholders(4)

$

 53.5 

 

$

 36.9 

 

$

 74.8 

 

$

 54.5 

 

 

 

Adjusted EBITDA(5)

$

 78.0 

 

$

 72.6 

 

$

 172.4 

 

$

 147.2 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit margin

 

11.6%

 

 

14.3%

 

 

10.7%

 

 

9.5%

 

 

 

MG&A as a percent of revenue

 

4.1%

 

 

5.3%

 

 

5.3%

 

 

4.8%

 

 

 

EBITDA margin

 

8.2%

 

 

9.3%

 

 

5.9%

 

 

5.6%

 

 

 

Adjusted EBITDA margin

 

8.2%

 

 

9.2%

 

 

5.9%

 

 

5.1%

 

 

 

Operating margin

 

6.4%

 

 

7.2%

 

 

3.7%

 

 

3.5%

 

 

 

Earnings per share - basic

$

 1.07 

 

$

 0.69 

 

$

 1.47 

 

$

 1.07 

 

 

 

Earnings per share - diluted

$

 0.72 

 

$

 0.49 

 

$

 1.18 

 

$

 0.84 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings per share- basic(6)

$

 1.01 

 

$

 0.69 

 

$

 1.41 

 

$

 1.01 

 

 

 

Adjusted earnings per share- diluted(6)

$

 0.72 

 

$

 0.49 

 

$

 1.18 

 

$

 0.84 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog

 

 

 

 

 

 

$

2,428 

 

$

2,390 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)     This press release presents certain non-GAAP and additional GAAP (GAAP refers to Canadian Generally Accepted Accounting Principles) financial measures to assist readers in understanding the Company's performance.  Non-GAAP financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with GAAP. Further details on non-GAAP and additional GAAP measures are included in the Company’s year end Management’s Discussion and Analysis and available through the System for Electronic Document Analysis and Retrieval at www.sedar.com.
(2)     “EBITDA” represents earnings or losses before net financing expense, the fair value gain (loss) on convertible debentures, income taxes, depreciation and amortization, and non-controlling interests. 
(3)     “Operating profit (loss)” represents the profit (loss) from operations before net financing expense, income taxes and non-controlling interests.
(4)     “Adjusted profit (loss) attributable to shareholders” represents the profit (loss) attributable to shareholders adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of Aecon’s convertible debentures.
(5)     “Adjusted EBITDA” represents EBITDA adjusted to exclude the gain (loss) on sales of assets and investments.
(6)     “Adjusted earnings (loss) per share” represents earnings (loss) per share calculated using adjusted profit (loss) attributable to shareholders.

Revenue and operating profit (loss) by segment for the years ended December 31, 2012 and 2011 are set out and discussed in the tables and sections below:

$ millions

For the year ended

 

 

 

December 31

 

 

 

 

Revenue

 

 

Operating profit (loss)

 

 

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

Infrastructure

$

 1,897.1 

 

$

 1,904.7 

 

$

 59.5 

 

$

 64.9 

 

 

Industrial

 

 1,014.0 

 

 

 918.3 

 

 

 57.9 

 

 

 30.2 

 

 

Concessions

 

 42.2 

 

 

 81.2 

 

 

 25.1 

 

 

 35.9 

 

 

Other costs and eliminations(1)

 

 (6.5)

 

 

 (8.0)

 

 

 (32.7)

 

 

 (30.5)

 

 

Consolidated

$

 2,946.8 

 

$

 2,896.2 

 

$

 109.8 

 

$

 100.5 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)         The Other costs and eliminations category includes corporate and other costs that are not directly allocable to segments and also includes inter-segment eliminations.

Backlog reached $2.428 billion at December 31, 2012 compared to $2.390 billion for 2011, with the extended duration of work beyond the next twelve months representing 42 per cent versus 38 per cent at year end 2011.

Not included in backlog, but important to Aecon’s prospects due to the significant volume involved, is the expected revenue from Aecon’s growing alliances and supplier-of-choice arrangements where the amount and/or value of work to be carried out is not specified. In 2012, this additional work represented approximately 25 per cent of overall revenue.

OPERATING AND FINANCIAL RESULTS

“Aecon’s operational performance in 2012 sets the foundation for us to continue making progress on all fronts,” said Teri McKibbon, Chief Operating Officer.  “Strong performance in mining, industrial operations and continued improvements in buildings operations - along with a solid backlog and significant bidding activity - bodes well for our ongoing performance going forward.” 

While operating profit increased by $9.3 million to $109.8 million for 2012, the comparison of year-over-year results was significantly impacted by gains from the sale of assets and investments in 2011 ($11.5 million from Israel alone) as well as operating profits from operations in Israel ($6.8 million) prior to their sale in September 2011.  After adjusting for gains from the sale of assets and investments and operating profits from operations in Israel in 2011, operating profit for 2012 was $31.1 million higher than 2011.

Adjusted EBITDA (excluding gains on sale of assets and investments) increased by 17 per cent to $172.4 million for the year ($147.2 million in 2011) due primarily to improved margins (adjusted EBITDA margin of 5.9 per cent in 2012 versus 5.1 per cent in 2011). 

For the year ended December 31, 2012, Aecon operated in three principal segments within the construction and infrastructure development industry:  Infrastructure, Industrial and Concessions. 

INFRASTRUCTURE SEGMENT

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 and pipeline construction, buildings construction and mining operations.

INFRASTRUCTURE 
  
Financial Highlights 

 

 

 

Three months ended

 

 

Year ended

 

 

$ millions

 

December 31

 

 

December 31

 

 

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 601.4 

 

$

 553.2 

 

$

 1,897.1 

 

$

 1,904.7 

 

 

Gross profit

$

 54.6 

 

$

 73.5 

 

$

 160.7 

 

$

 151.1 

 

 

EBITDA

$

 45.0 

 

$

 58.4 

 

$

 105.7 

 

$

 110.4 

 

 

Adjusted EBITDA

$

 44.8 

 

$

 57.4 

 

$

 104.7 

 

$

 105.8 

 

 

Operating profit

$

 31.0 

 

$

 45.8 

 

$

 59.5 

 

$

 64.9 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

7.5%

 

 

10.6%

 

 

5.6%

 

 

5.8%

 

 

Adjusted EBITDA margin

 

7.4%

 

 

10.4%

 

 

5.5%

 

 

5.6%

 

 

Operating margin

 

5.2%

 

 

8.3%

 

 

3.1%

 

 

3.4%

 

 

Backlog

 

 

 

 

 

 

$

 1,677 

 

$

 1,516 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The increase in gross profit within Infrastructure was due primarily to a strong performance from Mining operations, reflecting ongoing growth in the oil sands, as well as from improvements in Utilities operations.  These improvements were partly offset by lower gross profit from Transportation and Heavy Civil operations.

For the three months and year ended December 31, 2012, the operating profit in the Infrastructure segment increased/(decreased) over the same periods last year as follows:

 

 

 

 

Three months ended

 

 

Year ended

 

 

$ millions

 

December 31

 

 

December 31

 

 

 

 

 

 

 

 

 

 

 

Transportation

$

 (0.4)

 

$

 (12.8)

 

 

Heavy Civil

 

 (12.1)

 

 

 (16.5)

 

 

Utilities

 

 2.4 

 

 

 (3.2)

 

 

Mining

 

 

 

 

 

 

 

 

Ongoing operations

 

 9.8 

 

 

 36.1 

 

 

 

Gain on sale of equipment

 

 (1.1)

 

 

 (4.3)

 

 

Social Infrastructure

 

 (13.4)

 

 

 (4.7)

 

 

 

 

 

 

 

 

 

 

Decrease in Infrastructure operating profit

$

 (14.8)

 

$

 (5.4)

 

 

For the year ended December 31, 2012, the decline in operating profit reflected lower profits in the Heavy Civil sector due to a number of significant projects closed out during the year.  This included construction of the New Quito Airport where a combination of lower revenue and lower margin resulted in an approximate $24 million year-over-year decline in Heavy Civil operating profit.  While this was largely offset by the release of certain project contingencies related to Quito in the Concessions segment and of income taxes related to the project, it had an adverse impact on Infrastructure profit and margin.   

In addition, lower volume and margin in Transportation and Social Infrastructure were contributing factors.  Increased profits in Mining operations in Western Canada were due to higher volume and margin and improved equipment utilization.

Infrastructure backlog at December 31, 2012 rose to $1,677 million – an increase of $161 million or 11 percent – as compared to $1,516 million in 2011.  New contract awards totaled $2,058 million in 2012 compared to $1,391 million in the prior year.
 
INDUSTRIAL SEGMENT

Industrial operations include all of Aecon’s industrial manufacturing and construction activities including in-plant construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of once-through heat recovery steam generators.

INDUSTRIAL
 
Financial Highlights

 

 

 

Three months ended

 

 

Year ended

 

 

$ millions

 

December 31

 

 

December 31

 

 

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 339.4 

 

$

 230.1 

 

$

 1,014.0 

 

$

 918.3 

 

 

Gross profit

$

 42.8 

 

$

 32.7 

 

$

 122.6 

 

$

 91.2 

 

 

EBITDA

$

 25.8 

 

$

 17.4 

 

$

 65.4 

 

$

 38.4 

 

 

Adjusted EBITDA

$

 26.0 

 

$

 17.4 

 

$

 65.5 

 

$

 38.7 

 

 

Operating profit

$

 23.9 

 

$

 15.5 

 

$

 57.9 

 

$

 30.2 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

7.6%

 

 

7.6%

 

 

6.5%

 

 

4.2%

 

 

Adjusted EBITDA margin

 

7.6%

 

 

7.6%

 

 

6.5%

 

 

4.2%

 

 

Operating margin

 

7.0%

 

 

6.7%

 

 

5.7%

 

 

3.3%

 

 

Backlog

 

 

 

 

 

 

$

751 

 

$

874 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The improvements in the Industrial segment resulted from improved margins and higher volume in the resources and commodity mining sector in Western Canada operations as well as increased volume from Central Canada’s fabrication operations.

For the three months and year ended December 31, 2012, the operating profit in the Industrial segment increased/(decreased) over the same periods last year as follows:

 

 

 

Three months ended

 

 

Year ended

 

 

$ millions

 

December 31

 

 

December 31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Industrial (Construction and Fabrication)

$

 7.5 

 

$

 31.3 

 

 

IST

 

 0.9 

 

 

 (3.6)

 

 

Increase in Industrial operating profit

$

 8.4 

 

$

 27.7 

 

Industrial backlog at December 31, 2012 was $123 million lower than the same time last year primarily due to lower backlog in Heavy Industrial operations.  Most of the reduction in new awards reflects the year-over-year impact of several large multi-year project awards received in the second half of 2011.

CONCESSIONS SEGMENT

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.

CONCESSIONS
 
Financial Highlights

 

 

 

Three months ended

 

 

Year ended

 

 

$ millions

 

December 31

 

 

December 31

 

 

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

10.6 

 

$

10.6 

 

$

42.2 

 

$

81.2 

 

 

Gross profit

$

13.0 

 

$

6.3 

 

$

31.7 

 

$

31.8 

 

 

EBITDA

$

12.3 

 

$

5.0 

 

$

28.1 

 

$

39.3 

 

 

Adjusted EBITDA

$

12.3 

 

$

5.0 

 

$

28.1 

 

$

27.8 

 

 

Operating profit

$

12.3 

 

$

4.1 

 

$

25.1 

 

$

35.9 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

116.3%

 

 

47.4%

 

 

66.5%

 

 

48.4%

 

 

Adjusted EBITDA margin

 

116.3%

 

 

47.4%

 

 

66.5%

 

 

34.2%

 

 

Operating margin

 

116.3%

 

 

39.0%

 

 

59.5%

 

 

44.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months and year ended December 31, 2012, the operating profit in the Concessions segment increased/(decreased) over the same periods last year as follows:

 

 

 

 

Three months ended

 

 

Year ended

 

 

$ millions

 

December 31

 

 

December 31

 

 

 

 

 

 

 

 

 

 

 

Quito Airport Concessionaire

$

 8.2 

 

$

 7.5 

 

 

Cross Israel Highway Operator (sold in Q3 2011)

 

 - 

 

 

 (6.8)

 

 

Gain on sale of investment in operator of CIH in 2011

 

 - 

 

 

 (11.5)

 

 

Increase/(decrease) in Concessions operating profit

$

 8.2 

 

$

 (10.8)

 

The majority of the decrease in revenue and operating profit in the Concessions segment during the year ended December 31, 2012 is the result of the sale in the third quarter of 2011 of Aecon’s interest in the operator of the Cross Israel Highway.  The segment benefitted in 2012 from the release of contingencies related to the Quito airport project following substantial completion of the project during the fourth quarter.

DIVIDEND INCREASE

Aecon’s Board of Directors approved an increase in the dividend to be paid to all holders of Aecon Common Shares.  The annual dividend will increase to $0.32 per share (from $0.28 per share) to be paid in four quarterly payments of $0.08 cents per share (from $0.07 per share). The first increased quarterly dividend payment will be paid on April 1, 2013 to shareholders of record on March 22, 2013.

CONSOLIDATED RESULTS

The consolidated results for the three months and years ended December 31, 2012 and 2011 are available at the end of this news release.

Balance Sheet Highlights

 

 

 

 

 

December 31

December 31

(in thousands of Canadian dollars) (unaudited)

 

2012

 

2011

 

 

 

 

 

Cash and cash equivalents and restricted cash

$

 106,210 

$

 221,290 

Other current assets

 

 1,022,417 

 

 842,959 

Property, plant and equipment

 

 508,849 

 

 482,148 

Other long-term assets

 

 491,806 

 

 437,698 

Total Assets

$

 2,129,282 

$

 1,984,095 

 

 

 

 

 

Current liabilities

$

 873,951 

$

 791,836 

Non-recourse project debt

 

 156,041 

 

 137,078 

Long-term debt

 

 146,048 

 

 142,581 

Convertible debentures

 

 253,189 

 

 251,429 

Other long-term liabilities

 

 150,485 

 

 171,294 

 

 

 

 

 

Equity

 

 549,568 

 

 489,877 

Total Liabilities and Equity

$

 2,129,282 

$

 1,984,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONFERENCE CALL

A conference call has been scheduled for Wednesday, March 13, 2013 at 9:00 a.m. (ET) to discuss Aecon’s 2012 year end financial results.  Participants should dial 416-981-9012 or 1-800-379-4140 at least 10 minutes prior to the conference time.  A replay will be available after 11:00 a.m. at 1-800-558-5253 or 416-626-4100 until midnight on March 20, 2013. The reservation number is 21649205.

ABOUT AECON
Aecon Group Inc. is a Canadian leader in construction and infrastructure development providing integrated turnkey services to private and public sector clients.  Aecon is pleased to be consistently recognized as one of the Best Employers in Canada.

CONSOLIDATED STATEMENTS OF INCOME 
 
(in thousands of Canadian dollars, except per share amounts) (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

For the year ended

 

 

December 31

December 31

December 31

December 31

 

 

2012 

2011 

2012 

2011 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 948,702 

$

 790,340 

$

 2,946,796 

$

 2,896,167 

Direct costs and expenses

 

 (838,346)

 

 (677,596)

 

 (2,631,791)

 

 (2,622,034)

Gross profit

 

 110,356 

 

 112,744 

 

 315,005 

 

 274,133 

 

 

 

 

 

 

 

 

 

 

Marketing, general and administrative expenses

 

 (38,457)

 

 (41,618)

 

 (157,191)

 

 (138,832)

Depreciation and amortization

 

 (17,772)

 

 (16,772)

 

 (63,562)

 

 (62,548)

Income from construction projects accounted for using the equity method

 

 5,757 

 

 3,742 

 

 14,440 

 

 14,058 

Other income (loss)

 

 408 

 

 (1,249)

 

 1,072 

 

 13,721 

Operating profit

 

 60,292 

 

 56,847 

 

 109,764 

 

 100,532 

 

 

 

 

 

 

 

 

 

 

Finance income

 

 495 

 

 535 

 

 2,135 

 

 5,679 

Finance costs

 

 (5,598)

 

 (10,358)

 

 (29,275)

 

 (36,923)

Fair value gain (loss) on convertible debentures

 

 3,944 

 

 (275)

 

 4,260 

 

 4,269 

Profit before income taxes

 

 59,133 

 

 46,749 

 

 86,884 

 

 73,557 

Income tax expense

 

 (577)

 

 (9,794)

 

 (5,943)

 

 (11,414)

Profit for the period

$

 58,556 

$

 36,955 

$

 80,941 

$

 62,143 

Attributable to:

 

 

 

 

 

 

 

 

 

Shareholders

$

 56,427 

$

 36,699 

$

 77,978 

$

 57,553 

 

Non-controlling interests

 

 2,129 

 

 256 

 

 2,963 

 

 4,590 

 

 

$

 58,556 

$

 36,955 

$

 80,941 

$

 62,143 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

 1.07 

$

 0.69 

$

 1.47 

$

 1.07 

Diluted earnings per share

$

 0.72 

$

 0.49 

$

 1.18 

$

 0.84