TORONTO, July 26,
2023 /CNW/ - Aecon Group Inc. (TSX: ARE) ("Aecon" or
the "Company") today reported results for the second quarter of
2023 with an 8% year-to-date increase in revenue and backlog of
$6.9 billion at June 30, 2023.
"With significant new contract awards in the second
quarter, backlog of $6.9 billion
and recurring revenue programs continuing to see robust demand,
Aecon is well-positioned to achieve further revenue growth over the
next few years," said Jean-Louis
Servranckx, President and Chief Executive Officer, Aecon
Group Inc. "We are focused on closing out four challenging
legacy projects while achieving solid execution on our other
projects and selectively adding to backlog through a disciplined
bidding approach that supports long-term margin improvement and a
strategic focus on project and concession opportunities delivered
under more collaborative models and linked to decarbonization,
sustainability and energy transition."
HIGHLIGHTS
All quarterly financial information
contained in this news release is unaudited.
- Revenue for the three months ended June
30, 2023 of $1,167 million was
$44 million, or 4%, higher compared
to the same period in 2022.
- Adjusted EBITDA(1)(2) of
$16.7 million for the three months
ended June 30, 2023 (Adjusted EBITDA
margin(3) of 1.4%) compared to Adjusted EBITDA of
$38.5 million (Adjusted EBITDA margin
of 3.4%) in the same period in 2022 and operating profit of
$55.6 million compared to operating
profit of $5.1 million in the same
period in 2022.
- Net profit of $28.2 million
(diluted earnings per share of $0.38)
for the three months ended June 30,
2023 compared to a net loss of $6.4
million (diluted loss per share of $0.10) 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" and Section 13 "Risk
Factors" of the Company's June 30,
2023 Management's Discussion and Analysis ("MD&A"), 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, impacts of COVID-19, supply chain
disruptions, and inflation related to labour and materials. Aecon
recognized an operating loss of $81.3
million in the second quarter of 2023 (operating loss of
$28.2 million in the same period of
2022) from these four legacy projects. At June 30, 2023, the remaining backlog to be worked
off on these projects was $699
million.
- Reported backlog at June 30, 2023
of $6,851 million compared to backlog
of $6,605 million at June 30, 2022. New contract awards of
$2,016 million were booked in the
second quarter of 2023 compared to $1,305
million during the same period in 2022.
- On May 1, 2023, Aecon announced
the closing of the previously disclosed definitive purchase
agreement with Green Infrastructure Partners Inc. ("GIP") under
which Aecon sold its Aecon Transportation East ("ATE")
roadbuilding, aggregates and materials businesses in Ontario for $235
million. Net cash proceeds received on closing were
$155.3 million, net of debt and other
estimated closing adjustments.
- Aecon announced that it was selected by Alberta Transportation
and Economic Corridors to deliver the Deerfoot Trail Improvements
project in Calgary, Alberta, under
two contracts with an aggregate value of $615 million. Construction commenced in the
second quarter of 2023 and completion is anticipated in the fourth
quarter of 2027.
- Shoreline Power Group, a joint venture in which Aecon is the
lead partner, was awarded a $1.3
billion Fuel Channel and Feeder Replacement ("FCFR")
contract by Bruce Power for Units 4, 5, 7 and 8 at the Bruce
Nuclear Generating Station in Tiverton,
Ontario. Aecon's share of the contract is $1 billion. Planning work commenced in the second
quarter of 2023, with construction expected to begin in the first
quarter of 2025 and completion anticipated in 2032. The joint
venture is now contracted to execute FCFR work on all six of Bruce
Power's nuclear reactors.
- During the second quarter Oneida Energy Storage Limited
Partnership ("Oneida LP"), a consortium in which Aecon Concessions
is an 8.35% equity partner, reached financial close on the Oneida
Energy Storage Project in Ontario.
Aecon is also executing the Engineering, Procurement and
Construction scope, which commenced in the second quarter of 2023
and is expected to reach completion in 2025.
CONSOLIDATED FINANCIAL
HIGHLIGHTS(1)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
$ millions (except
per share amounts)
|
|
June
30
|
|
June
30
|
|
|
|
|
2023
|
|
|
2022
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,166.9
|
|
$
|
1,123.2
|
$
|
2,274.1
|
|
$
|
2,109.2
|
|
|
Gross profit
|
|
45.1
|
|
|
77.5
|
|
112.0
|
|
|
138.6
|
|
|
Marketing, general and
administrative
expense
|
|
(43.1)
|
|
|
(52.7)
|
|
(97.3)
|
|
|
(105.8)
|
|
|
Income from projects
accounted for using
the equity method
|
|
4.8
|
|
|
3.7
|
|
8.0
|
|
|
6.8
|
|
|
Other income
|
|
70.1
|
|
|
0.1
|
|
82.7
|
|
|
2.3
|
|
|
Depreciation and
amortization
|
|
(21.2)
|
|
|
(23.6)
|
|
(44.2)
|
|
|
(46.5)
|
|
|
Operating profit
(loss)
|
|
55.6
|
|
|
5.1
|
|
61.2
|
|
|
(4.6)
|
|
|
Finance
income
|
|
1.8
|
|
|
0.2
|
|
3.2
|
|
|
0.3
|
|
|
Finance cost
|
|
(16.1)
|
|
|
(13.2)
|
|
(33.1)
|
|
|
(25.0)
|
|
|
Profit (loss) before
income taxes
|
|
41.3
|
|
|
(8.0)
|
|
31.4
|
|
|
(29.3)
|
|
|
Income tax (expense)
recovery
|
|
(13.1)
|
|
|
1.6
|
|
(12.6)
|
|
|
5.5
|
|
|
Profit
(loss)
|
$
|
(28.2)
|
|
$
|
(6.4)
|
$
|
18.8
|
|
$
|
(23.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin(4)
|
|
3.9 %
|
|
|
6.9 %
|
|
4.9 %
|
|
|
6.6 %
|
|
|
MG&A as a
percent of revenue(4)
|
|
3.7 %
|
|
|
4.7 %
|
|
4.3 %
|
|
|
5.0 %
|
|
|
Adjusted
EBITDA(2)
|
|
16.7
|
|
$
|
38.5
|
|
41.3
|
|
$
|
59.1
|
|
|
Adjusted EBITDA
margin(3)
|
|
1.4 %
|
|
|
3.4 %
|
|
1.8 %
|
|
|
2.8 %
|
|
|
Operating
margin(4)
|
|
4.8 %
|
|
|
0.5 %
|
|
2.7 %
|
|
|
(0.2) %
|
|
|
Earnings (loss) per
share - basic
|
$
|
0.46
|
|
$
|
(0.10)
|
$
|
0.30
|
|
$
|
(0.39)
|
|
|
Earnings (loss) per
share - diluted
|
$
|
0.38
|
|
$
|
(0.10)
|
$
|
0.28
|
|
$
|
(0.39)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog (at end of
period)(2)
|
|
|
|
|
|
$
|
6,851
|
|
$
|
6,605
|
|
|
|
|
|
|
|
|
|
|
|
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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.
|
(2)
|
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 June
30, 2023 of $1,167 million was
$44 million, or 4%, higher compared
to the second quarter of 2022. In the Construction segment, higher
revenue of $35 million was driven by
increases in civil ($42 million),
industrial ($23 million), and
utilities ($11 million), partially
offset by lower revenue in nuclear operations ($31 million) and urban transportation solutions
($10 million). In the Concessions
segment, higher revenue of $8 million
for the three months ended June 30,
2023 was primarily due to the increase in commercial flight
operations at the Bermuda
International Airport.
Operating profit of $55.6 million
for the three months ended June 30,
2023 improved by $50.5 million
compared to an operating profit of $5.1
million in the same period in 2022. The improvement in
quarter-over-quarter operating profit was largely due to an
increase in other income of $70.0
million compared to the same period in 2022. This increase
was related to a gain on sale of ATE ($38.0
million reported in Corporate within Other Costs and
Eliminations), higher gains on sale of property, buildings, and
equipment ($31.3 million of which
$13.5 million was included in the
Construction segment and $17.8
million in Corporate), and from higher foreign exchange
gains ($0.7 million).
The above gains in operating profit were partially offset by
lower gross profit in the second quarter of 2023 of $32.4 million. In the Construction segment, gross
profit decreased by $38.4 million as
a result of negative gross profit related to four fixed price
legacy projects in the quarter of $81.3
million, arising from two of the four projects, one of which
was in the civil sector and one in urban transportation solutions,
compared to negative gross profit on the fixed price legacy
projects of $28.2 million in the
second quarter of 2022. These four fixed price legacy projects are
discussed in Section 5 "Recent Developments" and Section 10.2
"Contingencies" in the June 30, 2023
MD&A, and Section 13 "Risk Factors" in the 2022 Annual
MD&A. Other than the impact of these fixed price legacy
projects in the quarter, higher gross profit in the balance of the
Construction segment was largely due to improved results in urban
transportation solutions. In the Concessions segment, gross profit
increased by $5.8 million, primarily
from an improvement in results from airport operations at the
Bermuda International Airport.
Marketing, general and administrative expense ("MG&A") for
the three months ended June 30, 2023
decreased by $9.6 million compared to
the same period in 2022 primarily due to lower personnel, project
pursuit, and bid costs. MG&A as a percentage of revenue for the
second quarter decreased from 4.7% in 2022 to 3.7% in 2023.
Reported backlog at June 30, 2023
of $6,851 million compares to backlog
of $6,605 million at June 30, 2022. New contract awards of
$2,016 million were booked in the
second quarter of 2023 compared to $1,305
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 June 30, 2023 MD&A.
CONSTRUCTION SEGMENT
Financial Highlights
|
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
$
millions
|
|
June
30
|
|
|
June
30
|
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,139.4
|
|
$
|
1,104.2
|
|
$
|
2,229.9
|
|
$
|
2,075.8
|
|
|
Gross
profit
|
$
|
31.1
|
|
$
|
69.5
|
|
$
|
93.3
|
|
$
|
125.9
|
|
|
Adjusted
EBITDA(1)
|
$
|
(4.4)
|
|
$
|
33.7
|
|
$
|
17.9
|
|
$
|
53.0
|
|
|
Operating profit
(loss)
|
$
|
(7.5)
|
|
$
|
12.7
|
|
$
|
8.7
|
|
$
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin(3)
|
|
2.7 %
|
|
|
6.3 %
|
|
|
4.2 %
|
|
|
6.1 %
|
|
|
Adjusted EBITDA
margin(2)
|
|
(0.4) %
|
|
|
3.1 %
|
|
|
0.8 %
|
|
|
2.6 %
|
|
|
Operating
margin(3)
|
|
(0.7) %
|
|
|
1.1 %
|
|
|
0.4 %
|
|
|
0.7 %
|
|
|
Backlog (at end of
period)
|
|
|
|
|
|
|
$
|
6,752
|
|
$
|
6,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
June 30, 2023 of $1,139 million was $35
million, or 3%, higher compared to the same period in 2022.
Revenue was higher in civil operations ($42
million) driven by an increase in major projects in both
eastern and western Canada and
roadbuilding construction work in western Canada, partially offset by lower volume of
roadbuilding construction work in eastern Canada of $52
million as a result of the sale of ATE in the second quarter
of 2023. Revenue was also higher in industrial operations
($23 million) driven primarily by
increased activity on mainline pipeline work in western
Canada which offset a lower volume
of field construction work primarily at chemical facilities, and in
utilities operations ($11 million)
primarily due to an increase in telecommunications and high-voltage
electrical transmission work. Partially offsetting these increases
was lower revenue in nuclear operations ($31
million) from a lower volume of refurbishment work at
nuclear generating stations located in Ontario, and in urban transportation solutions
($10 million) primarily from a
decrease in light rail transit ("LRT") project work.
Operating loss in the Construction segment of $7.5 million in the three months ended
June 30, 2023 compares to an
operating profit of $12.7 million in
the same period in 2022, a decrease of $20.2
million. This decrease was driven by lower gross profit in
civil operations due to negative gross profit of $31.3 million in the second quarter of 2023 from
one of the four fixed price legacy projects versus a gross profit
of $4.3 million in the same period in
2022 from the same project and by a negative gross profit of
$50.0 million from one of the four
fixed price legacy projects in urban transportation solutions
compared to a negative gross profit of $32.8
million from one of the other fixed price legacy projects in
urban transportation solutions in the same period last year. The
four fixed price legacy projects are discussed in Section 5 "Recent
Developments" and Section 10.2 "Contingencies" in the June 30, 2023 MD&A, and Section 13 "Risk
Factors" in the 2022 Annual MD&A. Other than the impact of
these fixed price legacy projects in the quarter, higher gross
profit in the balance of the Construction segment was driven by
improved results in urban transportation solutions. In addition,
operating profit in the period was favourably impacted by an
increase in other income of $12.8
million, driven by higher gains on the sale of property,
buildings, and equipment of $13.8
million primarily in industrial operations, and partially
offset by lower foreign exchange gains of $0.6 million.
Construction backlog at June 30,
2023 was $6,752 million, which
was $240 million higher than the same
time last year. Backlog increased period-over-period in nuclear
($810 million) and utilities
($152 million) and decreased in urban
transportation solutions ($324
million), civil ($222
million), and industrial operations ($176 million). Backlog at June 30, 2023 excludes all amounts related to ATE
which was sold in the second quarter of 2023 (see Section 5 "Recent
Developments" in the June 30, 2023
MD&A) at which time related backlog of $447 million was removed. New contract awards
totaled $1,990 million in the second
quarter of 2023 and $2,785 million
year-to-date, compared to $1,279
million and $2,472 million,
respectively, in the same periods last year.
CONCESSIONS SEGMENT
Financial Highlights
|
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
$
millions
|
|
June
30
|
|
|
June
30
|
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
27.3
|
|
$
|
19.2
|
|
$
|
44.3
|
|
$
|
33.6
|
|
|
Gross
profit
|
$
|
13.7
|
|
$
|
7.9
|
|
$
|
18.4
|
|
$
|
12.4
|
|
|
Income from projects
accounted for
using the equity method
|
$
|
4.8
|
|
$
|
3.4
|
|
$
|
8.3
|
|
$
|
6.8
|
|
|
Adjusted
EBITDA(1)
|
$
|
27.6
|
|
$
|
17.4
|
|
$
|
42.6
|
|
$
|
31.0
|
|
|
Operating
profit
|
$
|
14.4
|
|
$
|
5.2
|
|
$
|
16.8
|
|
$
|
6.7
|
|
|
Backlog (at end of
period)
|
|
|
|
|
|
|
$
|
99
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 June 30,
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, 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 June 30,
2023, revenue in the Concessions segment of $27 million was $8
million higher compared to 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 for the three months
ended June 30, 2023 improved by
$9.2 million. Higher operating profit
was largely a result of an improvement in operating results at the
Bermuda International Airport and
from an increase in management and development fees.
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.
DIVIDEND
Aecon's next quarterly dividend of 18.5
cents per share will be paid on October 3, 2023 to shareholders of record as of
September 22, 2023.
OUTLOOK
Demand for Aecon's services across Canada continues to be strong. During the
first six months of 2023, Aecon was awarded a number of projects
that were added to backlog including delivery of the Deerfoot Trail
Improvements project in Calgary,
Alberta and an Aecon joint venture was awarded the Fuel
Channel and Feeder Replacement contract for four units at the Bruce
Nuclear Generating Station in Tiverton,
Ontario. 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 progressive design-build 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 $6.9 billion at
June 30, 2023 and recurring revenue
programs continuing to see robust demand, 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. Results have been negatively
impacted by these four legacy projects in recent periods,
undermining positive revenue and profitability trends in the
balance of Aecon's business. Until these projects are complete and
related claims have been resolved, there is a risk that this could
also occur in future periods – see Section 5 "Recent Developments"
and Section 10.2 "Contingencies" in the June
30, 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 May 1, 2023, Aecon announced
the closing of the previously disclosed definitive purchase
agreement with GIP under which Aecon sold its ATE operations. Net
cash proceeds received on closing, net of debt and cash assumed by
the purchaser, were $155.3 million.
On March 15, 2023, Aecon announced
that it has entered into an agreement with CC&L Infrastructure
to sell a 49.9% interest in the Bermuda International Airport concessionaire
for US$128.5 million ($170.1 million equivalent at June 30, 2023) in cash. Closing of this sale
transaction is expected in the third quarter of 2023. Upon closing,
Aecon expects to use the net proceeds from the transaction 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 is an 8.35% equity partner,
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 June 30, 2023, Aecon had a
committed revolving credit facility of $600
million, of which $188 million
was drawn and $11 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 and six months ended
June 30, 2023 and 2022 are available
at the end of this news release.
CONSOLIDATED BALANCE SHEETS
|
|
June
30
|
|
December
31
|
$
thousands
|
|
2023
|
|
2022
|
|
|
|
|
|
Cash and cash
equivalents and restricted cash
|
$
|
358,639
|
$
|
484,245
|
Assets of disposal
group classified as held for sale
|
|
616,776
|
|
-
|
Other current
assets
|
|
1,988,675
|
|
1,839,009
|
Property, plant and
equipment
|
|
256,145
|
|
395,101
|
Other long-term
assets
|
|
308,349
|
|
848,662
|
Total
Assets
|
$
|
3,528,584
|
$
|
3,567,017
|
|
|
|
|
|
Current portion of
long-term debt - recourse
|
$
|
41,893
|
$
|
56,564
|
Current portion of
long-term project debt - non-recourse
|
-
|
|
3,347
|
Current portion of
convertible debentures
|
|
181,421
|
|
178,878
|
Liabilities of disposal
groups classified as held for sale
|
|
486,051
|
|
|
Other current
liabilities
|
|
1,632,713
|
|
1,595,674
|
Long-term debt -
recourse
|
|
104,230
|
|
173,638
|
Long-term project debt
- non-recourse
|
|
-
|
|
375,654
|
Other long-term
liabilities
|
|
133,829
|
|
229,267
|
|
|
|
|
|
Equity
|
|
948,447
|
|
953,995
|
Total Liabilities
and Equity
|
$
|
3,528,584
|
$
|
3,567,017
|
CONFERENCE CALL
A conference call and live webcast has been scheduled for
9 a.m. (Eastern Time) on Thursday,
July 27, 2023. Participants should dial 1-833-470-1428 or
1-404-975-4839 at least 10 minutes prior to the conference time.
The conference ID is 516159. An accompanying presentation of
the second quarter 2023 financial results will be available after
market close on July 26, 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 July 27, 2023 at 1-866-813-9403 or
1-929-458-6194, or online until midnight on August 24, 2023. The access code is
517090. A replay of the webcast will also be available
within 24 hours following the call.
ABOUT AECON
Aecon Group Inc. (TSX: ARE) is a national Canadian construction
and infrastructure development company with global experience.
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 and six months ended June 30, 2023 and 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
millions
|
|
|
|
Three months ended
June 30, 2023
|
Six months ended
June 30, 2023
|
|
|
|
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
|
|
|
Operating profit
(loss)
|
$
|
(7.5)
|
$
|
14.4
|
$
|
48.8
|
$
|
55.6
|
$
|
8.7
|
$
|
16.8
|
$
|
35.8
|
$
|
61.2
|
|
|
|
|
Depreciation and
amortization
|
|
15.1
|
|
5.6
|
|
0.5
|
|
21.2
|
|
32.1
|
|
11.3
|
|
0.8
|
|
44.2
|
|
|
|
|
(Gain) on sale of
assets
|
|
(13.8)
|
|
-
|
|
(55.8)
|
|
(69.6)
|
|
(26.1)
|
|
-
|
|
(55.8)
|
|
(81.9)
|
|
|
|
|
(Income) loss from
projects accounted
for using the equity method
|
|
0.1
|
|
(4.8)
|
|
-
|
|
(4.8)
|
|
0.3
|
|
(8.3)
|
|
-
|
|
(8.0)
|
|
|
|
|
Equity Project
EBITDA(1)
|
|
1.7
|
|
12.5
|
|
-
|
|
14.2
|
|
2.9
|
|
22.9
|
|
-
|
|
25.8
|
|
|
|
|
Adjusted
EBITDA(1)
|
$
|
(4.4)
|
$
|
27.6
|
$
|
(6.5)
|
$
|
16.7
|
$
|
17.9
|
$
|
42.6
|
$
|
(19.2)
|
$
|
41.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
millions
|
|
|
Three months ended
June 30, 2022
|
Six months ended
June 30, 2022
|
|
|
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
Construction
|
Concessions
|
Other costs
and
eliminations
|
Consolidated
|
|
|
Operating profit
(loss)
|
$
|
12.7
|
$
|
5.2
|
$
|
(12.8)
|
$
|
5.1
|
$
|
13.9
|
$
|
6.7
|
$
|
(25.2)
|
$
|
(4.6)
|
|
|
Depreciation and
amortization
|
|
18.1
|
|
5.3
|
|
0.2
|
|
23.6
|
|
35.5
|
|
10.7
|
|
0.3
|
|
46.5
|
|
|
(Gain) on sale of
assets
|
|
(0.3)
|
|
-
|
|
-
|
|
(0.3)
|
|
(2.3)
|
|
-
|
|
-
|
|
(2.3)
|
|
|
(Income) from
projects accounted
for using the equity method
|
|
(0.3)
|
|
(3.4)
|
|
-
|
|
(3.7)
|
|
-
|
|
(6.8)
|
|
-
|
|
(6.8)
|
|
|
Equity Project
EBITDA(1)
|
|
3.5
|
|
10.3
|
|
-
|
|
13.8
|
|
5.9
|
|
20.3
|
|
-
|
|
26.2
|
|
|
Adjusted
EBITDA(1)
|
$
|
33.7
|
$
|
17.4
|
$
|
(12.6)
|
$
|
38.5
|
$
|
53.0
|
$
|
31.0
|
$
|
(24.8)
|
$
|
59.1
|
|
(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 and six months ended June 30, 2023 and 2022:
$
millions
|
|
|
|
Three months ended
June 30, 2023
|
|
Six months ended
June 30, 2023
|
|
|
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
|
$
|
1.6
|
$
|
12.5
|
$
|
-
|
$
|
14.1
|
$
|
2.7
|
$
|
22.9
|
$
|
-
|
$
|
25.6
|
|
|
Depreciation and
amortization
|
|
0.1
|
|
-
|
|
-
|
|
0.1
|
|
0.2
|
|
-
|
|
-
|
|
0.2
|
|
|
Equity Project
EBITDA(2)
|
$
|
1.7
|
$
|
12.5
|
$
|
-
|
$
|
14.2
|
$
|
2.9
|
$
|
22.9
|
$
|
-
|
$
|
25.8
|
|
$
millions
|
|
|
|
Three months ended
June 30, 2022
|
|
Six months ended
June 30, 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
|
$
|
3.3
|
$
|
10.3
|
$
|
-
|
$
|
13.6
|
$
|
5.6
|
$
|
20.3
|
$
|
-
|
$
|
25.9
|
|
|
Depreciation and
amortization
|
|
0.2
|
|
-
|
|
-
|
|
0.2
|
|
0.3
|
|
-
|
|
-
|
|
0.3
|
|
|
Equity Project
EBITDA(2)
|
$
|
3.5
|
$
|
10.3
|
$
|
-
|
$
|
13.8
|
$
|
5.9
|
$
|
20.3
|
$
|
-
|
$
|
26.2
|
|
(1)
|
Refer to Note 11
"Projects Accounted for Using the Equity Method" in the June 30,
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: expectations regarding the impact
of the four fixed price legacy projects and expected timelines of
such projects; its strategy of seeking to differentiate its service
offering and execution capability and the expected results
therefrom; its strategic focus on clean energy and other projects
linked to sustainability and the opportunities arising therefrom;
expectations regarding the repayment of the outstanding convertible
debentures at or before maturity and other debt obligations in
2023; expectations regarding the pipeline of opportunities
available to Aecon; Aecon Concession's equity interest in Oneida
Energy Storage L.P.; statements regarding the various phases of
projects for Aecon; 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. 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; 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 June 30, 2023
MD&A and in the 2022 Annual MD&A dated February 28, 2023 and available through SEDAR+ at
(www.sedarplus.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 AND
SIX MONTHS ENDED JUNE 30, 2023 AND 2022
|
(in thousands of
Canadian dollars, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended
|
For the six months
ended
|
|
|
|
June
30
|
|
June 30
|
June
30
|
|
June 30
|
|
|
|
2022
|
|
2022
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,166,918
|
|
$
|
1,123,238
|
$
|
2,274,073
|
|
$
|
2,109,152
|
Direct costs and
expenses
|
|
|
(1,121,775)
|
|
|
(1,045,709)
|
|
(2,162,097)
|
|
|
(1,970,531)
|
Gross
profit
|
|
|
45,143
|
|
|
77,529
|
|
111,976
|
|
|
138,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, general and
administrative expense
|
|
|
(43,105)
|
|
|
(52,715)
|
|
(97,343)
|
|
|
(105,826)
|
Depreciation and
amortization
|
|
|
(21,241)
|
|
|
(23,595)
|
|
(44,165)
|
|
|
(46,469)
|
Income from projects
accounted for using the
equity method
|
|
|
4,750
|
|
|
3,745
|
|
8,037
|
|
|
6,766
|
Other income
|
|
|
70,093
|
|
|
108
|
|
82,729
|
|
|
2,345
|
Operating profit
(loss)
|
|
|
55,640
|
|
|
5,072
|
|
61,234
|
|
|
(4,563)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
|
|
1,757
|
|
|
158
|
|
3,175
|
|
|
261
|
Finance cost
|
|
|
(16,127)
|
|
|
(13,186)
|
|
(33,051)
|
|
|
(24,973)
|
Profit (loss) before
income taxes
|
|
|
41,270
|
|
|
(7,956)
|
|
31,358
|
|
|
(29,275)
|
Income tax recovery
(expense)
|
|
|
(13,062)
|
|
|
1,605
|
|
(12,588)
|
|
|
5,481
|
Profit (loss) for
the period
|
|
$
|
28,208
|
|
$
|
(6,351)
|
$
|
18,770
|
|
$
|
(23,794)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
(loss) per share
|
|
$
|
0.46
|
|
$
|
(0.10)
|
$
|
0.30
|
|
$
|
(0.39)
|
Diluted earnings
(loss) per share
|
|
$
|
0.38
|
|
$
|
(0.10)
|
$
|
0.28
|
|
$
|
(0.39)
|
SOURCE Aecon Group Inc.