TORONTO, April 25,
2023 /CNW/ - Aecon Group Inc. (TSX: ARE)
("Aecon" or the "Company") today reported results for the first
quarter of 2023 with year-over-year increases in revenue, operating
profit, and Adjusted EBITDA, and backlog of $6 billion at March 31,
2023.
"With backlog of $6 billion and
recurring revenue programs continuing to see robust demand, driven
primarily by the utilities sector, Aecon believes the North
American construction market continues to be resilient in the
sectors Aecon serves," said Jean-Louis
Servranckx, President and Chief Executive Officer, Aecon
Group Inc. "Aecon is committed to maintaining a disciplined
capital allocation approach and positioning the business for
long-term success, underpinned by a strategic focus on projects and
concession opportunities linked to decarbonization, sustainability
and the energy transition as well as projects procured and
delivered under more collaborative models."
HIGHLIGHTS
All quarterly financial information
contained in this news release is unaudited.
- Revenue for the three months ended March
31, 2023 of $1,107 million was
$121 million, or 12%, higher compared
to the same period in 2022.
- Adjusted EBITDA(1)(2) of $24.6 million for the three months ended
March 31, 2023 (Adjusted EBITDA
margin(3) of 2.2%) compared to Adjusted EBITDA of
$20.6 million (Adjusted EBITDA margin
of 2.1%) in the same period in 2022 and operating profit of
$5.6 million (operating
margin(4) of 0.5%) compared to an operating loss of
$9.6 million in the same period in
2022.
- Net loss of $9.4 million (diluted
loss per share of $0.15) for the
three months ended March 31, 2023
compared to a net loss of $17.4
million (diluted loss per share of $0.29) during the same period in 2022.
- Four large fixed price legacy projects being performed by joint
ventures in which Aecon is a participant (see Section 5 "Recent
Developments", Section 10.2 "Contingencies" of the Company's
March 31, 2023 Management's
Discussion and Analysis ("MD&A") and Section 13 "Risk Factors"
in the 2022 Annual MD&A which are available on the Company's
profile on SEDAR (www.sedar.com), are being negatively impacted due
to additional costs for which the joint ventures assert that the
owners are contractually responsible, including for, among other
things, unforeseeable site conditions, third party delays,
COVID-19, supply chain disruptions, and inflation related to labour
and materials. Aecon recognized an operating loss of $2.8 million in both the first quarter of 2023
and 2022 from these four legacy projects. At March 31, 2023, the remaining backlog to be
worked off on these projects was $801
million with three of the four projects currently expected
to be substantially complete by dates between late 2023 and early
2024, and the fourth is currently expected to be substantially
complete during 2025.
- Reported backlog at March 31,
2023 of $6,002 million
compared to backlog of $6,423 million
at March 31, 2022. New contract
awards of $812 million were booked in
the first quarter of 2023 compared to $1,211
million in the same period in 2022.
- On March 1, 2023, Aecon announced
that it has entered into a definitive purchase agreement with Green
Infrastructure Partners Inc. under which Aecon has agreed to sell
its Aecon Transportation East roadbuilding, aggregates and
materials businesses in Ontario
for $235 million in cash. The
transaction is expected to close in the second quarter of
2023.
- On March 15, 2023, Aecon
announced that it has entered into an agreement with Connor, Clark
& Lunn Infrastructure to sell a 49.9% interest in the
Bermuda International Airport
concessionaire, Bermuda Skyport Corporation Limited ("Skyport"),
for US$128.5 million ($173.9 million equivalent at March 31, 2023) in cash. Aecon Concessions will
retain the management contract for the airport and joint control of
Skyport with a 50.1% retained interest. The transaction is expected
to close in the second quarter of 2023.
- In the first quarter of 2023 Aecon was awarded a $215 million contract by Parsons Inc. for the
Giant Mine Remediation Water Treatment Plant Project in
Yellowknife, Northwest
Territories. Construction is expected to commence in the
second quarter of 2023, with anticipated completion in the second
quarter of 2026.
- Aecon's fourth annual Sustainability Report, entitled
Building a Sustainable Future, was released on April 21, 2023, outlining its progress and goals
in its Environmental, Social and Governance (ESG) practices. The
complete report is available on Aecon's website at
www.aecon.com/sustainability.
CONSOLIDATED FINANCIAL
HIGHLIGHTS(1)
|
|
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|
|
|
|
|
|
|
|
|
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Three months
ended
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|
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$ millions (except
per share amounts)
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|
March
31
|
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|
|
|
|
2023
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|
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2022
|
|
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|
|
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Revenue
|
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$
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1,107.2
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$
|
985.9
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Gross profit
|
|
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66.8
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|
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61.1
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Marketing, general and
administrative expense
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|
(54.2)
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(53.1)
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Income from projects
accounted for using the equity method
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|
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3.3
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|
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3.0
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|
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Other income
|
|
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12.6
|
|
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2.2
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|
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Depreciation and
amortization
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|
(22.9)
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|
(22.9)
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Operating profit
(loss)
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5.6
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(9.6)
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Finance
income
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|
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1.4
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|
|
0.1
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Finance cost
|
|
|
(16.9)
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|
|
(11.8)
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|
Loss before income
taxes
|
|
|
(9.9)
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|
(21.3)
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|
|
Income tax
recovery
|
|
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0.5
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|
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3.9
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|
Loss
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$
|
(9.4)
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$
|
(17.4)
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|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin(4)
|
|
|
6.0 %
|
|
|
6.2 %
|
|
|
MG&A as a
percent of revenue(4)
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4.9 %
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|
|
5.4 %
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|
|
Adjusted
EBITDA(2)
|
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|
24.6
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|
|
20.6
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|
|
Adjusted EBITDA
Margin(3)
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2.2 %
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|
2.1 %
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Operating
margin(4)
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0.5 %
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(1.0) %
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|
Loss per share –
basic
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$
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(0.15)
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$
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(0.29)
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|
|
Loss per share –
diluted
|
|
$
|
(0.15)
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|
$
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(0.29)
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|
|
|
|
|
|
|
|
|
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|
Backlog (at end of
period)
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$
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6,002
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$
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6,423
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(1)
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This press release
presents certain non-GAAP and supplementary financial measures, as
well as non-GAAP ratios to assist readers in understanding the
Company's performance (GAAP refers to Canadian Generally Accepted
Accounting Principles under IFRS). Further details on these
measures and ratios are included in the "Non-GAAP and Supplementary
Financial Measures" and "Reconciliations and Calculations" sections
of this press release.
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(2)
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This is a non-GAAP
financial measure. Refer to the "Non-GAAP and Supplementary
Financial Measures" and "Reconciliations and Calculations" sections
of this press release for more information on each non-GAAP
financial measure.
|
(3)
|
This is a non-GAAP
ratio. Refer to the "Non-GAAP and Supplementary Financial Measures"
section of this press release for more information on each non-GAAP
ratio.
|
(4)
|
This is a
supplementary financial measure. Refer to the "Non-GAAP and
Supplementary Financial Measures" section of this press release for
more information on each supplementary financial
measure.
|
Revenue for the three months ended March
31, 2023 of $1,107 million was
$121 million, or 12%, higher compared
to the same period in 2022. Revenue was higher in the Construction
segment ($119 million) driven by
increases in civil ($65 million),
industrial ($27 million), nuclear
($11 million), utilities
($9 million), and urban
transportation solutions ($7
million). In the Concessions segment, higher revenue of
$3 million for the three months ended
March 31, 2023 was primarily due to
the improvement of commercial flight operations at the Bermuda International Airport.
Operating profit of $5.6 million
for the three months ended March 31,
2023 improved by $15.2 million
compared to an operating loss of $9.6
million in the same period in 2022. The period-over-period
improvement in operating profit was driven in part by higher gross
profit of $5.7 million largely due to
an increase in the Construction segment primarily from higher
volume and gross profit margin in industrial and urban
transportation solutions, and from higher volume in nuclear
operations, partially offset by lower gross profit margin in civil
and utilities operations. In the Concessions segment, gross profit
increased by $0.2 million primarily
from an improvement in results from airport operations at the
Bermuda International Airport.
Marketing, general and administrative expense ("MG&A")
increased in the first quarter of 2023 by $1.1 million compared to the same period in 2022,
driven primarily by higher personnel costs. However, MG&A as a
percentage of revenue decreased from 5.4% in the first quarter of
2022 to 4.9% in the first quarter of 2023.
Reported backlog at March 31, 2023
of $6,002 million compared to backlog
of $6,423 million at March 31, 2022. New contract awards of
$812 million were booked in the first
quarter of 2023 compared to $1,211
million in the same period in 2022.
REPORTING SEGMENTS
Aecon reports its financial performance on the basis of two
segments: Construction and Concessions, which are described in the
Company's March 31, 2023
MD&A.
CONSTRUCTION SEGMENT FINANCIAL HIGHLIGHTS
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Three months
ended
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|
|
$
millions
|
|
March
31
|
|
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
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Revenue
|
$
|
1,090.5
|
|
$
|
971.6
|
|
|
Gross
profit
|
$
|
62.2
|
|
$
|
56.5
|
|
|
Adjusted
EBITDA(1)
|
$
|
22.3
|
|
$
|
19.3
|
|
|
Operating
profit
|
$
|
16.2
|
|
$
|
1.3
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin(3)
|
|
5.7 %
|
|
|
5.8 %
|
|
|
Adjusted EBITDA
margin(2)
|
|
2.0 %
|
|
|
2.0 %
|
|
|
Operating
margin(3)
|
|
1.5 %
|
|
|
0.1 %
|
|
|
Backlog (at end of
period)
|
$
|
5,902
|
|
$
|
6,337
|
|
|
|
|
|
|
|
|
|
|
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(1)
|
This is a non-GAAP
financial measure. Refer to the "Non-GAAP And Supplementary
Financial Measures" and "Reconciliations and Calculations"
sections of this press release for more information on each
non-GAAP financial measure.
|
(2)
|
This is a non-GAAP
ratio. Refer to the "Non-GAAP And Supplementary Financial
Measures" and "Reconciliations and Calculations"
sections of this press release for more information on each
non-GAAP ratio.
|
(3)
|
This is a
supplementary financial measure. Refer to the "Non-GAAP And
Supplementary Financial Measures" section of this press
release for more information on each supplementary financial
measure.
|
Revenue in the Construction segment for the three months ended
March 31, 2023 of $1,090 million was $119
million, or 12%, higher compared to the same period in 2022.
Construction segment revenue was higher in each sector, with the
largest increase being in civil operations ($65 million) primarily from an increase in major
projects in both eastern and western Canada. In industrial operations, higher
revenue ($27 million) was due to
increased activity on mainline pipeline work and higher field
construction work at mining and wastewater facilities all in
western Canada, partially offset
by a lower volume of field construction work at chemical facilities
in eastern Canada. Higher revenue
in nuclear operations ($11 million)
was driven by an increased volume of refurbishment work at nuclear
generating stations in Ontario and
the U.S., in utilities operations ($9
million) from increased volume of telecommunications and
high-voltage electrical transmission work, partially offset by a
lower volume of oil and gas distribution work, and in urban
transportation solutions ($7 million)
driven primarily by a higher volume of rail electrification project
work in Ontario.
Operating profit in the Construction segment of $16.2 million in the first three months of 2023
increased by $14.9 million compared
to an operating profit of $1.3
million in the same period in 2022. This increase was driven
by higher volume and gross profit margin in industrial and urban
transportation solutions, and from higher volume in nuclear
operations. Higher gross profit and gross profit margin in
industrial was largely due to a negative gross profit of
$7.1 million in the same period last
year versus $nil in the first quarter of 2023 from one of the four
fixed price legacy projects discussed in Section 5 "Recent
Developments" and Section 10.2 "Contingencies" in the March 31, 2023 MD&A, and Section 13 "Risk
Factors" in the 2022 Annual MD&A. In utilities operations,
lower gross profit margin was offset by an increase in gains on the
sale of property and equipment of $10.4
million. These increases were partially offset by lower
gross profit margin in civil operations due to negative gross
profit of $2.8 million in the first
quarter of 2023 versus a gross profit of $3.9 million in the same period last year from
one of the four fixed price legacy projects.
Construction backlog at March 31,
2023 was $5,902 million
compared to $6,337 million at the
same time in 2022. Backlog decreased period-over-period in urban
transportation solutions ($315
million), nuclear ($268
million), and industrial operations ($16 million), while backlog increased in
utilities ($112 million) and civil
operations ($52 million). New
contract awards of $795 million in
the first quarter of 2023 were $398
million lower than the same period in 2022.
CONCESSIONS SEGMENT FINANCIAL HIGHLIGHTS
|
|
|
Three months
ended
|
|
|
$
millions
|
|
March
31
|
|
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
17.0
|
|
$
|
14.4
|
|
|
Gross
profit
|
$
|
4.7
|
|
$
|
4.4
|
|
|
Income from projects
accounted for using the equity method
|
$
|
3.5
|
|
$
|
3.4
|
|
|
Adjusted
EBITDA(1)
|
$
|
15.0
|
|
$
|
13.6
|
|
|
Operating
profit
|
$
|
2.4
|
|
$
|
1.5
|
|
|
Backlog (at end of
period)
|
$
|
100
|
|
$
|
86
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This is a non-GAAP
financial measure. Refer to the "Non-GAAP And Supplementary
Financial Measures" and "Reconciliations and Calculations"
sections of this press release for more information on each
non-GAAP financial measure.
|
Aecon currently holds a 100% interest in Skyport, the
concessionaire responsible for the Bermuda airport's operations, maintenance and
commercial functions, and the entity that will manage and
coordinate the overall delivery of the Bermuda International Airport Redevelopment
Project over a 30-year concession term that commenced in 2017. On
December 9, 2020, Skyport opened the
new passenger terminal building at the L.F. Wade International
Airport. Aecon's participation in Skyport is consolidated and, as
such, is accounted for in the consolidated financial statements by
reflecting, line by line, the assets, liabilities, revenue and
expenses of Skyport. See Section 5
"Recent Developments" of the March 31,
2023 MD&A for details of an agreement to sell a 49.9%
interest in Skyport. However, Aecon's concession participation in
the Eglinton Crosstown light rail transit ("LRT"), Finch West LRT,
Gordie Howe International Bridge, Waterloo LRT, and the GO
Expansion On-Corridor Works projects are joint ventures that are
accounted for using the equity method.
For the three months ended March 31,
2023, revenue in the Concessions segment of $17 million was $3
million higher than the same period in 2022 primarily due to
an increase in commercial flight operations at the Bermuda International Airport.
Operating profit in the Concessions segment of $2.4 million for the three months ended
March 31, 2023 improved by
$0.9 million compared to an operating
profit of $1.5 million in the first
three months of 2022, primarily from an increase in management and
development fees as well as an improvement in operating results
from the Bermuda International
Airport.
Except for Operations & Maintenance ("O&M") activities
under contract for the next five years and that can be readily
quantified, Aecon does not include in its reported backlog expected
revenue from concession agreements. As such, while Aecon expects
future revenue from its concession assets, no concession backlog,
other than from such O&M activities for the next five years, is
reported.
OUTLOOK
Demand for Aecon's services across Canada continues to be strong, particularly in
smaller and medium sized projects. In addition, during 2022, a
consortium in which Aecon is a participant was selected to deliver
the long-term GO Expansion On-Corridor Works project in
Ontario under a progressive
design, build, operate and maintain contract model which begins
with a two-year development phase leading into the main
construction scope and a 25-year operations and maintenance
component, while another consortium in which Aecon is a participant
was selected as the development partner for the Scarborough Subway
Extension Stations, Rail and Systems project in Ontario to be delivered using a progressive
design-build model. None of the anticipated work from these two
significant long-term projects is yet reflected in backlog. Aecon
(including joint ventures in which Aecon is a participant) is also
prequalified on a number of project bids due to be awarded during
the next twelve months and has a pipeline of opportunities to
further add to backlog over time. With backlog of $6.0 billion at March 31,
2023 and recurring revenue programs continuing to see robust
demand, driven by the utilities sector and ongoing recovery in
airport traffic in Bermuda, Aecon
believes it is positioned to achieve further revenue growth over
the next few years.
While volatile global and Canadian economic conditions are
impacting inflation, interest rates, and overall supply chain
efficiency, these factors have stabilized to some extent and have
largely been and will continue to be reflected in the pricing and
commercial terms of the Company's recent and prospective project
awards and bids. However, certain ongoing joint venture projects
that were bid some years ago have experienced impacts related, in
part, to those factors, that will require satisfactory resolution
of claims with the respective clients – see Section 5 "Recent
Developments" and Section 10.2 "Contingencies" in the March 31, 2023 MD&A and Section 13 "Risk
Factors" in the 2022 Annual MD&A regarding the risk on four
large fixed price legacy projects entered into in 2018 or earlier
by joint ventures in which Aecon is a participant.
On March 1, 2023, Aecon announced
that it has entered into a definitive purchase agreement with Green
Infrastructure Partners Inc. under which Aecon has agreed to sell
its Aecon Transportation East roadbuilding, aggregates and
materials businesses in Ontario
for $235 million in cash. On
March 15, 2023, Aecon announced that
it has entered into an agreement with Connor, Clark & Lunn
Infrastructure to sell a 49.9% interest in the Bermuda International Airport concessionaire
for US$128.5 million ($173.9 million equivalent at March 31, 2023) in cash. Closing of these sales
transactions is expected in the second quarter of 2023. Upon
closing, Aecon expects to use the net proceeds from the
transactions to pay down debt on its revolving credit facility.
Aecon plans to maintain a disciplined capital allocation approach
focused on long-term shareholder value.
In the Construction segment, with strong demand, growing
recurring revenue programs, and diverse backlog in hand, Aecon is
focused on achieving solid execution on its projects and
selectively adding to backlog through a disciplined bidding
approach that supports long-term margin improvement in this
segment. In addition to the selection of consortiums in which Aecon
is a participant for two large transit related projects in 2022
noted above, in early 2023, a partnership in which Aecon is a
participant announced that it had executed a six-year alliance
agreement with Ontario Power Generation to deliver North America's first grid-scale Small Modular
Reactor through the Darlington New Nuclear Project in Clarington, Ontario. In addition, Oneida LP, a
consortium in which Aecon Concessions will be an 8.35% equity
partner upon financial close, executed an agreement with the
Independent Electricity System Operator for the Oneida Energy
Storage Project to deliver a 250 megawatt / 1,000 megawatt-hour
energy storage facility near Nanticoke
Ontario, with Aecon awarded a $141
million Engineering, Procurement and Construction contract
by Oneida LP. All of these projects further demonstrate Aecon's
strategic focus in the industry with respect to projects linked to
decarbonization, energy transition, and sustainability and
represent more collaborative procurement models than have
traditionally been used.
In the Concessions segment, in addition to expecting an ongoing
recovery in travel through the Bermuda International Airport through 2023,
there are a number of opportunities to add to the existing
portfolio of Canadian and international concessions in the next 12
to 24 months, including projects with private sector clients that
support a collective focus on sustainability and the transition to
a net-zero economy. The GO Expansion On-Corridor Works project and
the Oneida Energy Storage project noted above are examples of the
role Aecon's Concessions segment is playing in developing,
operating and maintaining assets related to this transition.
At March 31, 2023, Aecon had a
committed revolving credit facility of $600
million, of which $240 million
was drawn and $10 million utilized
for letters of credit. On December 31,
2023, convertible debentures with a face value of
$184 million will mature and the
Company expects to repay these debentures at maturity or before.
The Company has no other debt or working capital credit facility
maturities in 2023, except equipment loans and leases in the normal
course.
CONSOLIDATED RESULTS
The consolidated results for the three months ended March 31, 2023 and 2022 are available at the end
of this news release.
BALANCE SHEET
|
|
March
31
|
|
December
31
|
$
thousands
|
|
2023
|
|
2022
|
|
|
|
|
|
Cash and cash
equivalents and restricted cash
|
$
|
358,362
|
$
|
484,245
|
Assets of disposal
groups classified as held for sale
|
|
832,361
|
|
-
|
Other current
assets
|
|
1,858,175
|
|
1,839,009
|
Property, plant and
equipment
|
|
272,597
|
|
395,101
|
Other long-term
assets
|
|
301,528
|
|
848,662
|
Total
Assets
|
$
|
3,623,023
|
$
|
3,567,017
|
|
|
|
|
|
Current portion of
long-term debt - recourse
|
$
|
56,938
|
$
|
56,564
|
Current portion of
long-term project debt - non-recourse
|
-
|
|
3,347
|
Current portion of
convertible debentures
|
|
180,145
|
|
178,878
|
Liabilities of disposal
groups classified as held for sale
|
|
547,983
|
|
-
|
Other current
liabilities
|
|
1,606,917
|
|
1,595,674
|
Long-term debt -
recourse
|
|
165,740
|
|
173,638
|
Long-term project debt
- non-recourse
|
|
-
|
|
375,654
|
Other long-term
liabilities
|
|
130,716
|
|
229,267
|
|
|
|
|
|
Equity
|
|
934,584
|
|
953,995
|
Total Liabilities
and Equity
|
$
|
3,623,023
|
$
|
3,567,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONFERENCE CALL
A conference call and live webcast has been scheduled for
9 a.m. (Eastern Time) on Wednesday,
April 26, 2023. Participants should dial 1-833-950-0062 or
1-226-828-7575 at least 10 minutes prior to the conference time.
The conference ID is 294073. An accompanying presentation of
the first quarter 2023 financial results will be available after
market close on April 25, 2023 at
www.aecon.com/investing.
A live webcast of the conference call will also be available at
www.aecon.com/InvestorCalendar.
Participants should join the webcast at least 15 minutes prior
to the conference time to register and install any necessary
software. For those unable to attend the call, a replay will be
available after 2 p.m. (Eastern Time)
on April 26, 2023 at 1-866-813-9403
or 1-929-458-6194, or online until midnight on May 24, 2023. The access code is 214726. A
replay of the webcast will also be available within 24 hours
following the call.
AECON 2023 ANNUAL MEETING OF SHAREHOLDERS
Aecon's Annual Meeting of Shareholders will be held on
Tuesday, June 6, 2023. Additional
details will be set out in the Notice of Annual Meeting of
Shareholders and Management Information Circular which will be
filed on SEDAR prior to the meeting.
ABOUT AECON
Aecon Group Inc. (TSX: ARE) is a national Canadian construction
and infrastructure development company with global experience and
is proud to be recognized as one of the Best 50 Corporate Citizens
in Canada. Aecon delivers
integrated solutions to private and public-sector clients through
its Construction segment in the Civil, Urban Transportation,
Nuclear, Utility and Industrial sectors, and provides project
development, financing, investment and management services through
its Concessions segment. Join our online community on Twitter,
LinkedIn, Facebook and Instagram @AeconGroupInc.
NON-GAAP AND SUPPLEMENTARY FINANCIAL MEASURES
This press release presents certain non-GAAP and supplementary
financial measures, as well as non-GAAP ratios to assist readers in
understanding the Company's performance (GAAP refers to Generally
Accepted Accounting Principles under IFRS). These measures do not
have any standardized meaning and therefore are unlikely to be
comparable to similar measures presented by other issuers and
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP.
Throughout this press release, the following terms are used,
which do not have a standardized meaning under GAAP.
Non-GAAP Financial Measures
A non-GAAP financial measure: (a) depicts the historical or
expected future financial performance, financial position or cash
flow of the Company; (b) with respect to its composition, excludes
an amount that is included in, or includes an amount that is
excluded from, the composition of the most comparable financial
measure presented in the primary consolidated financial statements;
(c) is not presented in the primary financial statements of the
Company; and (d) is not a ratio.
Non-GAAP financial measures presented and discussed in this
press release are as follows:
- "Adjusted EBITDA" represents operating profit (loss)
adjusted to exclude depreciation and amortization, the gain (loss)
on sale of assets and investments, and net income (loss) from
projects accounted for using the equity method, but including
"Equity Project EBITDA" from projects accounted for using the
equity method (Refer to the "Reconciliations and Calculations"
section of this press release for a quantitative reconciliation to
the most comparable financial measure).
- "Equity Project EBITDA" represents Aecon's proportionate
share of the earnings or losses from projects accounted for using
the equity method before depreciation and amortization, finance
income, finance cost and income tax expense (recovery) (Refer to
the "Reconciliations and Calculations" section of this press
release for a quantitative reconciliation to the most comparable
financial measure).
Management uses the above non-GAAP financial measures to analyze
and evaluate operating performance. Aecon also believes the above
financial measures are commonly used by the investment community
for valuation purposes, and are useful complementary measures of
profitability, and provide metrics useful in the construction
industry. The most directly comparable measures calculated in
accordance with GAAP are operating profit and profit (loss)
attributable to shareholders.
Primary Financial Statements
Primary financial statements include any of the following: the
consolidated balance sheets, the consolidated statements of income,
the consolidated statements of comprehensive income, the
consolidated statements of changes in equity, and the consolidated
statements of cash flows.
Key financial measures presented in the primary financial
statements of the Company and discussed in this press release are
as follows:
- "Gross profit" represents revenue less direct costs and
expenses. Not included in the calculation of gross profit are
marketing, general and administrative expense ("MG&A"),
depreciation and amortization, income (loss) from projects
accounted for using the equity method, other income (loss), finance
income, finance cost, income tax expense (recovery), and
non-controlling interests.
- "Operating profit (loss)" represents the profit (loss)
from operations, before finance income, finance cost, income tax
expense (recovery) and non-controlling interests.
The above measures are presented on the face of the Company's
consolidated statements of income and are not meant to be a
substitute for other subtotals or totals presented in accordance
with IFRS, but rather should be evaluated in conjunction with such
IFRS measures.
- "Backlog" (Remaining Performance Obligations) means the
total value of work that has not yet been completed that: (a) has a
high certainty of being performed as a result of the existence of
an executed contract or work order specifying job scope, value and
timing; or (b) has been awarded to Aecon, as evidenced by an
executed binding letter of intent or agreement, describing the
general job scope, value and timing of such work, and where the
finalization of a formal contract in respect of such work is
reasonably assured. Operations and maintenance ("O&M")
activities are provided under contracts that can cover a period of
up to 30 years. In order to provide information that is comparable
to the backlog of other categories of activity, Aecon limits
backlog for O&M activities to the earlier of the contract term
and the next five years.
Remaining Performance Obligations, i.e. Backlog, is presented in
the notes to the Company's annual consolidated financial statements
and is not meant to be a substitute for other amounts presented in
accordance with GAAP, but rather should be evaluated in conjunction
with such GAAP measures.
Non-GAAP Ratios
A non-GAAP ratio is a financial measure presented in the form of
a ratio, fraction, percentage or similar representation and that
has a non-GAAP financial measure as one of its components and is
not disclosed in the financial statements of the Company.
A non-GAAP ratio presented and discussed in this press release
is as follows:
- "Adjusted EBITDA margin" represents Adjusted EBITDA as a
percentage of revenue.
Supplementary Financial Measures
A supplementary financial measure: (a) is, or is intended to be,
disclosed on a periodic basis to depict the historical or expected
future financial performance, financial position or cash flow of
the Company; (b) is not presented in the financial statements of
the Company, (c) is not a non-GAAP financial measure; and (d) is
not a non-GAAP ratio.
Key supplementary financial measures presented in this press
release are as follows:
- "Gross profit margin" represents gross profit as a
percentage of revenue.
- "Operating margin" represents operating profit (loss) as
a percentage of revenue.
- "MG&A as a percent of revenue" represents marketing,
general and administrative expense as a percentage of revenue.
RECONCILIATIONS AND CALCULATIONS
Set out below is the calculation of Adjusted EBITDA by segment
for the three months ended March 31,
2023 and 2022:
|
$
millions
|
|
|
|
|
|
Three months ended
March 31, 2023
|
Three months ended
March 31, 2022
|
|
|
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
|
|
Operating profit
(loss)
|
$
|
16.2
|
$
|
2.4
|
$
|
(13.0)
|
$
|
5.6
|
$
|
1.3
|
$
|
1.5
|
$
|
(12.4)
|
$
|
(9.6)
|
|
|
Depreciation and
amortization
|
|
17.0
|
|
5.6
|
|
0.3
|
|
22.9
|
|
17.4
|
|
5.3
|
|
0.2
|
|
22.9
|
|
|
(Gain) on sale of
assets
|
|
(12.2)
|
|
-
|
|
-
|
|
(12.2)
|
|
(2.1)
|
|
-
|
|
-
|
|
(2.1)
|
|
|
Income from projects
accounted for
using the equity method
|
|
0.2
|
|
(3.5)
|
|
-
|
|
(3.3)
|
|
0.3
|
|
(3.3)
|
|
-
|
|
(3.0)
|
|
|
Equity Project
EBITDA(1)
|
|
1.2
|
|
10.4
|
|
-
|
|
11.6
|
|
2.3
|
|
10.1
|
|
-
|
|
12.4
|
|
|
Adjusted
EBITDA(1)
|
$
|
22.4
|
$
|
14.9
|
$
|
(12.7)
|
$
|
24.6
|
$
|
19.2
|
$
|
13.6
|
$
|
(12.2)
|
$
|
20.6
|
|
|
(1)
|
This is a non-GAAP
financial measure. Refer to the "Non-GAAP and Supplementary
Financial Measures" section in this press release for more
information on each non-GAAP financial measure.
|
Set out below is the calculation of Equity Project EBITDA by
segment for the three months ended March 1,
2023 and 2022:
$
millions
|
|
|
|
Three months ended
March 31, 2023
|
|
Three months ended
March 31, 2022
|
|
|
Aecon's
proportionate share of
projects accounted for using the
equity method (1)
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
|
|
Operating
profit
|
$
|
1.0
|
$
|
10.4
|
$
|
-
|
$
|
11.4
|
$
|
2.1
|
$
|
10.1
|
$
|
-
|
$
|
12.2
|
|
|
Depreciation and
amortization
|
|
0.2
|
|
-
|
|
-
|
|
0.2
|
|
0.2
|
|
-
|
|
-
|
|
0.2
|
|
|
Equity Project
EBITDA(2)
|
$
|
1.2
|
$
|
10.4
|
$
|
-
|
$
|
11.6
|
$
|
2.3
|
$
|
10.1
|
$
|
-
|
$
|
12.4
|
|
|
|
(1)
|
Refer to Note 11
"Projects Accounted for Using the Equity Method" in March 31, 2023
interim condensed consolidated financial statements.
|
(2)
|
This is a non-GAAP
financial measure. Refer to the "Non-GAAP and Supplementary
Financial Measures" section in this press release for more
information on each non-GAAP financial measure.
|
STATEMENT ON FORWARD-LOOKING INFORMATION
The information in this press release includes certain
forward-looking statements which may constitute forward-looking
information under applicable securities laws. These forward-looking
statements are based on currently available competitive, financial
and economic data and operating plans but are subject to risks and
uncertainties. Forward-looking statements may include, without
limitation, statements regarding the operations, business,
financial condition, expected financial results, performance,
prospects, ongoing objectives, strategies and outlook for Aecon,
including statements regarding: the strength of the North American
construction market; its commitment to maintaining a disciplined
capital approach and anticipated results therefrom; its strategic
focus on projects and concessions opportunities linked to
decarbonization and the energy transition and sustainability and
projects procured and delivered under more collaborative models;
expectations regarding the impact of the four fixed price legacy
projects and expected timelines of such projects; the impact of
certain contingencies on Aecon (see: Section 10.2 "Contingencies"
in our March 31, 2023 MD&A);
backlog and estimated duration; Aecon's sale of ATE to GIP,
including transaction rationale, use of proceeds from the sale of
ATE and related transaction timeline; Aecon's sale of a 49.9%
interest in Skyport to CC&L Infrastructure, including
transaction rationale, use of proceeds from the sale and related
transaction timeline; project timelines; expectations regarding the
pipeline of opportunities available to Aecon; its strategy of
seeking to differentiate its service offering and execution
capability and the expected results therefrom; statements regarding
the various phases of projects for Aecon; the uncertainties related
to the unpredictability of global economic conditions; Aecon
Concession's equity interest in Oneida Energy Storage LP;
expectations regarding ongoing recovery in travel through
Bermuda International Airport in
2023 and opportunities to add to the existing portfolio of Canadian
and international concessions in the next 12 to 24 months; and,
expectations regarding the repayment of the outstanding convertible
debentures at or before maturity and other debt obligations in
2023. Forward-looking statements may in some cases be identified by
words such as "will," "plans," "schedule," "forecast," "outlook,"
"potential," "seek," "strategy," "may," "could," "might," "can,"
"believes," "expects," "anticipates," "estimates," "projects,"
"intends," "prospects," "targets," "occur," "continue," "should" or
the negative of these terms, or similar expressions.
In addition to events beyond Aecon's control, there are
factors which could cause actual or future results, performance or
achievements to differ materially from those expressed or inferred
herein including, but not limited to: the risk of not being able to
drive a higher margin mix of business by participating in more
complex projects, achieving operational efficiencies and synergies,
and improving margins; the risk of not being able to meet
contractual schedules and other performance requirements on large,
fixed priced contracts; the risk of not being able to meet its
labour needs at reasonable costs; the risk of not being able to
address any supply chain issues which may arise and pass on costs
of supply increases to customers; the risk of not being able,
through its joint ventures, to enter into implementation phases of
certain projects following the successful completion of the
relevant development phase; the risk of not being able to execute
its strategy of building strong partnerships and alliances; the
risk of not being able to execute its risk management strategy; the
risk of not being able to grow backlog across the organization by
winning major projects; the risk of not being able to maintain a
number of open, recurring and repeat contracts; the risk of not
being able to accurately assess the risks and opportunities related
to its industry's transition to a lower-carbon economy; the risk of
not being able to oversee, and where appropriate, respond to known
and unknown environmental and climate change-related risks,
including the ability to recognize and adequately respond to
climate change concerns or public, governmental and other
stakeholders' expectations on climate matters; the risk of not
being able to meet its commitment to meeting its greenhouse gas
emissions reduction targets; the risks associated with the strategy
of differentiating its service offerings in key end markets; the
risks associated with undertaking initiatives to train employees;
the risks associated with the seasonal nature of its business; the
risks associated with being able to participate in large projects;
the risks associated with legal proceedings to which it is a party;
the ability to successfully respond to shareholder activism; the
risk that Aecon's sale of ATE will not close; the risk that Aecon
will not realize the strategic rationale for the sale of ATE; the
risk that Aecon will not realize the opportunities presented by a
transition to a net-zero economy; the risk that Aecon will not
realize the anticipated balance sheet flexibility with the
completion of the sale of ATE; the risk Aecon's sale of a 49.9%
interest in Skyport to CC&L Infrastructure will not close; the
risk that Aecon will not realize the strategic rationale for the
sale of the equity interest in Skyport; the risk that Aecon will
not realize the anticipated balance sheet strength while preserving
capital for other long-term growth and concession opportunities in
connection with the sale of the equity interest in Skyport; and
risks associated with the COVID-19 pandemic and future pandemics
and Aecon's ability to respond to and implement measures to
mitigate the impact of COVID-19 and future pandemics.
These forward-looking statements are based on a variety of
factors and assumptions including, but not limited to that: none of
the risks identified above materialize, there are no unforeseen
changes to economic and market conditions and no significant events
occur outside the ordinary course of business. These assumptions
are based on information currently available to Aecon, including
information obtained from third-party sources. While the Company
believes that such third-party sources are reliable sources of
information, the Company has not independently verified the
information. The Company has not ascertained the validity or
accuracy of the underlying economic assumptions contained in such
information from third-party sources and hereby disclaims any
responsibility or liability whatsoever in respect of any
information obtained from third-party sources.
Risk factors are discussed in greater detail in Section 13 -
"Risk Factors" in the March 31, 2023
MD&A and in the 2022 Annual MD&A which are available on
SEDAR at (www.sedar.com). Except as required by applicable
securities laws, forward-looking statements speak only as of the
date on which they are made and Aecon undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise.
CONSOLIDATED STATEMENTS OF
INCOME |
FOR THE THREE MONTHS
ENDED MARCH 31, 2023 and 2022
|
(in thousands of
Canadian dollars, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
March
31
|
March
31
|
|
|
2023
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,107,155
|
$
|
985,914
|
Direct costs and
expenses
|
|
(1,040,322)
|
|
(924,822)
|
Gross
profit
|
|
66,833
|
|
61,092
|
|
|
|
|
|
|
Marketing, general and
administrative expense
|
|
(54,238)
|
|
(53,111)
|
Depreciation and
amortization
|
|
(22,924)
|
|
(22,874)
|
Income from projects
accounted for using the equity method
|
|
3,287
|
|
3,021
|
Other income
|
|
12,636
|
|
2,237
|
Operating profit
(loss)
|
|
5,594
|
|
(9,635)
|
|
|
|
|
|
|
Finance
income
|
|
1,418
|
|
103
|
Finance cost
|
|
(16,924)
|
|
(11,787)
|
Loss before income
taxes
|
|
(9,912)
|
|
(21,319)
|
Income tax
recovery
|
|
474
|
|
3,876
|
Loss for the
period
|
$
|
(9,438)
|
$
|
(17,443)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per
share
|
$
|
(0.15)
|
$
|
(0.29)
|
Diluted loss per
share
|
$
|
(0.15)
|
$
|
(0.29)
|
SOURCE Aecon Group Inc.