Aecon Group Inc. (TSX: ARE) (“Aecon” or the “Company”) today
reported results for the first quarter of 2024.
“With backlog of $6.3 billion, a strong bid
pipeline, and recurring revenue programs continuing to see robust
demand, Aecon is focused on achieving improved profitability and
margin predictability, and believes it is positioned to achieve
further revenue growth over the next few years,” said Jean-Louis
Servranckx, President and Chief Executive Officer, Aecon Group Inc.
“Moving forward, Aecon will continue to pursue and deliver the
majority of its work in established markets and under more
collaborative project delivery models, while embracing new
opportunities to grow in areas linked to the energy transition and
in select U.S. and international markets.”
HIGHLIGHTSAll quarterly
financial information contained in this news release is
unaudited.
- Revenue for the
three months ended March 31, 2024 of $847 million was $261 million,
or 24%, lower compared to the same period in 2023.
- Adjusted
EBITDA(1)(2) of $32.9 million for the three months ended March 31,
2024 (Adjusted EBITDA margin(3) of 3.9%) compared to Adjusted
EBITDA of $24.6 million (Adjusted EBITDA margin of 2.2%) in the
same period in 2023.
- Net loss of $6.1
million (diluted loss per share of $0.10) for the three months
ended March 31, 2024 compared to net loss of $9.4 million (diluted
loss per share of $0.15) in the same period in 2023.
- 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 March 31, 2024 Management’s Discussion and Analysis
(“MD&A”) which is available on the Company’s profile on SEDAR+
(www.sedarplus.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.
In the first three months of 2024, Aecon recognized an operating
profit of $nil from these four legacy projects. At March 31, 2024
the remaining backlog to be worked off on these projects was $330
million compared to $420 million at December 31, 2023 and $801
million at March 31, 2023.
- Reported backlog
at March 31, 2024 of $6,273 million compared to backlog of
$6,002 million at March 31, 2023. New contract awards of
$963 million were booked in the first quarter of 2024 compared to
$812 million in the same period in 2023.
- Aecon announced
the appointment of Jerome Julier to the position of Executive Vice
President and Chief Financial Officer, effective April 8,
2024.
- Contrecoeur
Terminal Constructors General Partnership, a consortium in which
Aecon holds a 40% interest, executed a contract with the Montréal
Port Authority for the Contrecœur Terminal Expansion project
in-water works under a Progressive Design-Build approach in
Québec.
- Aecon EBC Ladore
General Partnership, a consortium in which Aecon holds a 60%
interest, was awarded the first stage of a two-stage contract with
an expected value of $156 million by BC Hydro to deliver the Ladore
Spillway Seismic Upgrade Project in British Columbia under a
collaborative Early Contractor Involvement (“ECI”) model. The ECI
phase will commence in the second quarter of 2024, with
construction planned to commence in 2025 subject to overall project
approvals.
- Aecon’s fifth
annual Sustainability Report, entitled Advancing the Energy
Transition was released on April 22, 2024, and is available on
Aecon’s website at www.aecon.com/sustainability.
- Subsequent to
quarter-end:
- VIports Partners
(“VIports”), an Aecon-led consortium, was selected by the U.S.
Virgin Islands Port Authority to redevelop the Cyril E. King
Airport in St. Thomas and the Henry E. Rohlsen Airport in St. Croix
under a collaborative Design, Build, Finance, Operate and Maintain
Public-Private Partnership model. Aecon Concessions is the
development lead and will hold a 50% equity interest in the
project’s 40-year concession, and Aecon is the design-build lead.
Financial close is expected in the first quarter of 2025 following
a nine-month transition period.
- Aecon was
awarded a US$48 million contract by the Government of Anguilla for
the Clayton J. Lloyd International Airport Redevelopment Program
Package 3 project.
- South Fraser
Station Partners, a consortium in which Aecon holds a 33.3%
interest, was selected by the Province of British Columbia as the
preferred proponent for the stations contract on the Surrey Langley
SkyTrain Project. Financial close is expected in the second quarter
of 2024.
CONSOLIDATED FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
$ millions (except per share amounts) |
|
March 31 |
|
|
|
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
846.6 |
|
|
$ |
1,107.2 |
|
|
|
|
Gross profit |
|
62.8 |
|
|
|
66.8 |
|
|
|
|
Marketing, general and administrative expense |
|
(52.1 |
) |
|
|
(54.2 |
) |
|
|
|
Income from projects accounted for using the equity method |
|
2.3 |
|
|
|
3.3 |
|
|
|
|
Other income |
|
1.7 |
|
|
|
12.6 |
|
|
|
|
Depreciation and amortization |
|
(18.8 |
) |
|
|
(22.9 |
) |
|
|
|
Operating profit (loss) |
|
(4.2 |
) |
|
|
5.6 |
|
|
|
|
Finance income |
|
3.2 |
|
|
|
1.4 |
|
|
|
|
Finance cost |
|
(5.7 |
) |
|
|
(16.9 |
) |
|
|
|
Loss before income taxes |
|
(6.7 |
) |
|
|
(9.9 |
) |
|
|
|
Income tax recovery |
|
0.6 |
|
|
|
0.5 |
|
|
|
|
Loss |
$ |
(6.1 |
) |
|
$ |
(9.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin(4) |
|
7.4 |
% |
|
|
6.0 |
% |
|
|
|
MG&A as a percent of
revenue(4) |
|
6.2 |
% |
|
|
4.9 |
% |
|
|
|
Adjusted
EBITDA(2) |
|
32.9 |
|
|
|
24.6 |
|
|
|
|
Adjusted EBITDA
margin(3) |
|
3.9 |
% |
|
|
2.2 |
% |
|
|
|
Operating
margin(4) |
|
(0.5 |
)% |
|
|
0.5 |
% |
|
|
|
Loss per share – basic |
$ |
(0.10 |
) |
|
$ |
(0.15 |
) |
|
|
|
Loss per share – diluted |
$ |
(0.10 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Backlog (at end of period) |
$ |
6,273 |
|
|
$ |
6,002 |
|
|
|
|
|
|
|
|
|
|
|
(1) 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). 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 March 31,
2024 of $847 million was $261 million, or 24%, lower compared to
the same period in 2023. Revenue was lower in the Construction
segment ($247 million) driven by decreases in industrial ($181
million), urban transportation solutions ($41 million), civil ($36
million), and utilities ($13 million), partially offset by higher
revenue in nuclear operations ($24 million). In the Concessions
segment, lower revenue of $14 million for the three months ended
March 31, 2024 was primarily due to the use of the equity method of
accounting in 2024 for Aecon’s 50.1% retained interest in the
Bermuda International Airport concessionaire (“Skyport”) following
the sale of a 49.9% interest in Skyport in the third quarter of
2023.
Operating loss of $4.2 million for the three
months ended March 31, 2024 declined by $9.8 million compared to an
operating profit of $5.6 million in the same period in 2023.
Contributing to the change in operating profit was a decrease in
gross profit in the period of $4.0 million. In the Concessions
segment, gross profit decreased by $5.3 million primarily from the
use of the equity method of accounting in 2024 for Aecon’s 50.1%
retained interest in the Bermuda International Airport following
the sale of a 49.9% interest in Skyport in the third quarter of
2023. Partially offsetting this decrease was higher gross profit in
the Construction segment of $1.4 million primarily from higher
gross profit margin in urban transportation solutions and utilities
and from higher volume and gross profit margin in nuclear
operations, partially offset by the impact of lower volume on gross
profit in industrial and civil operations.
Other income of $1.7 million in the first
quarter of 2024 was $10.9 million lower compared to the same period
in 2023. The decrease is primarily related to a lower gain on the
sale of property and equipment of $11.2 million in the Construction
segment.
Reported backlog at March 31, 2024 of $6,273
million compared to backlog of $6,002 million at March 31, 2023.
New contract awards of $963 million were booked in the first
quarter of 2024 compared to $812 million in the same period in
2023.
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, 2024 Management’s Discussion
and Analysis (“MD&A”).
CONSTRUCTION SEGMENT
Financial Highlights
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|
Three months ended |
|
|
|
$ millions |
|
March 31 |
|
|
|
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
843.8 |
|
|
$ |
1,090.5 |
|
|
|
|
Gross profit |
$ |
63.6 |
|
|
$ |
62.2 |
|
|
|
|
Adjusted
EBITDA(1) |
$ |
27.8 |
|
|
$ |
22.3 |
|
|
|
|
Operating profit |
$ |
7.4 |
|
|
$ |
16.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin(3) |
|
7.5 |
% |
|
|
5.7 |
% |
|
|
|
Adjusted EBITDA
margin(2) |
|
3.3 |
% |
|
|
2.0 |
% |
|
|
|
Operating
margin(3) |
|
0.9 |
% |
|
|
1.5 |
% |
|
|
|
Backlog (at end of period) |
$ |
6,169 |
|
|
$ |
5,902 |
|
|
|
|
|
|
|
|
|
|
|
(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, 2024
of $844 million was $247 million, or 23%, lower compared to the
same period in 2023. Construction segment revenue was lower in
industrial operations ($181 million) primarily due to decreased
activity on mainline pipeline work in western Canada following the
achievement of substantial completion on a project in the third
quarter of 2023, in urban transportation solutions ($41 million)
from a lower volume of light rail transit work in Ontario, in civil
operations ($36 million) primarily from a lower volume of
roadbuilding construction work in eastern Canada of $31 million as
a result of the sale of Aecon Transportation East (“ATE”) in the
second quarter of 2023, and in utilities operations ($13 million)
from a decreased volume of telecommunications and oil and gas
distribution work, partially offset by an increased volume of
high-voltage electrical transmission and battery energy storage
system work. Partially offsetting these decreases was higher
revenue in nuclear operations ($24 million) driven by an increased
volume of refurbishment work at nuclear generating stations in
Ontario and the U.S.
Operating profit in the Construction segment of
$7.4 million in the first three months of 2024 decreased by $8.8
million compared to an operating profit of $16.2 million in the
same period in 2023. The lower operating profit was driven by a
decrease in gross profit in industrial operations and a decrease in
gains on the sale of property and equipment of $11.2 million.
Partially offsetting these decreases were higher gross profit
margin in utilities, higher volume and gross profit margin in
nuclear operations, and higher gross profit margin in urban
transportation solutions. Higher operating profit in civil
operations was primarily due to a lower seasonal operating loss
from roadbuilding construction work following the sale of ATE in
the second quarter of 2023 and partially offset by lower gross
profit margin from major projects in western Canada. Operating
profit in civil was also impacted by a negative gross profit of
$2.8 million in the first quarter of 2023 versus $nil in the first
quarter of 2024 from one of the four fixed price legacy projects
discussed in Section 5 “Recent Developments” and Section 10.2
“Contingencies” in the Company’s March 31, 2024 MD&A, and
Section 13 “Risk Factors” in the 2023 Annual MD&A.
Construction backlog at March 31, 2024 was
$6,169 million compared to $5,902 million at the same time in 2023.
Backlog increased period-over-period in nuclear ($850 million) and
industrial operations ($2 million), while backlog decreased in
civil operations ($306 million), urban transportation solutions
($216 million), and utilities ($62 million). New contract awards of
$960 million in the first quarter of 2024 were $165 million higher
than the same period in 2023.
CONCESSIONS SEGMENT
Financial Highlights
|
|
|
|
Three months ended |
|
|
|
$
millions |
|
March 31 |
|
|
|
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
3.0 |
|
|
$ |
17.0 |
|
|
|
Gross profit
(loss) |
$ |
(0.7 |
) |
|
$ |
4.7 |
|
|
|
Income from projects
accounted for using the equity method |
$ |
2.2 |
|
|
$ |
3.5 |
|
|
|
Adjusted
EBITDA(1) |
$ |
17.6 |
|
|
$ |
15.0 |
|
|
|
Operating
profit |
$ |
1.1 |
|
|
$ |
2.4 |
|
|
|
Backlog (at end of
period) |
$ |
104 |
|
|
$ |
100 |
|
|
|
|
|
|
|
|
|
|
(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 50.1% 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. Aecon’s participation in
Skyport is accounted for using the equity method. On September 20,
2023, Aecon sold a 49.9% interest in Skyport to Connor, Clark &
Lunn Infrastructure (“CC&L Infrastructure”) with Aecon
retaining the management contract for the airport. Prior to this
transaction, Aecon’s participation in Skyport was 100% consolidated
and, as such, was accounted for in the consolidated financial
statements by reflecting, line by line, the assets, liabilities,
revenue and expenses of Skyport. 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
also accounted for using the equity method.
For the three months ended March 31, 2024,
revenue in the Concessions segment of $3 million was $14 million
lower than the same period in 2023 primarily due to lower reported
revenue from the Bermuda International Airport due to the
commencement of the equity method accounting for the project
following the above noted sale of a 49.9% interest in Skyport in
the third quarter of 2023.
Operating profit in the Concessions segment of
$1.1 million for the three months ended March 31, 2024 decreased by
$1.3 million compared to an operating profit of $2.4 million in the
first three months of 2023. This decrease was primarily due to
lower operating profit from the Bermuda International Airport,
partially offset by an increase in management and development fees
from the balance of the concession operations. Under the equity
method of accounting, operating results for Aecon’s interest in
Skyport in the first quarter of 2024 were reported net of financing
costs and income taxes, which contributed to the lower
quarter-over-quarter operating profit results. Passenger traffic
levels, which are the primary driver of Aecon’s results from
operations at the Bermuda International Airport project, averaged
31% in 2021, 59% in 2022, 75% in 2023, and 81% in the first quarter
of 2024 of 2019 pre-pandemic traffic levels. These averages reflect
generally improving traffic over time as a percentage of
pre-pandemic levels.
Except for Operations and 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 Aecon’s goal is to
build a resilient company through a balanced and diversified work
portfolio across sectors, markets, geographies, project types,
sizes and delivery models while enhancing critical execution
capabilities and project selection to play to its strengths. Aecon
will continue to leverage its self-perform capabilities and One
Aecon approach with a goal to maximize value for clients through
improved cost certainty and schedule, while offering a broad range
of infrastructure services from development, engineering,
investment, and construction to longer term operations and
maintenance. Aecon will continue to pursue and deliver the majority
of its work in established markets, while embracing new
opportunities to grow in areas linked to decarbonization and the
energy transition, and in U.S. and international markets. These
opportunities are intended over the long term to diversify Aecon’s
geographic presence, provide further growth opportunities and
deliver more consistent earnings through economic cycles. To
complement its priority markets, Aecon is pursuing a balanced
portfolio of work delivered through both fixed and non-fixed price
contracting models with the goal of reducing fixed price work to
balance risk with acceptable returns. With backlog of $6.3 billion
at the end of the first quarter of 2024, recurring revenue programs
continuing to see robust demand, and a strong bid pipeline, Aecon
believes it is positioned to achieve further revenue growth over
the next few years and is focused on achieving improved
profitability and margin predictability.
In the Construction segment, demand for Aecon’s
services across Canada continues to be strong. Development phase
work is ongoing in consortiums in which Aecon is a participant to
deliver the long-term GO Expansion On-Corridor Works project, the
Scarborough Subway Extension Stations, Rail and Systems project,
and the Darlington New Nuclear Project, all in Ontario, and the
Contrecœur Terminal Expansion project in-water works in Quebec.
These projects are being delivered using progressive design-build
or alliance models and each project is expected to move into the
construction phase in 2025. The GO Expansion On-Corridor Works
project also includes an operations and maintenance component over
a 23-year term commencing January 1, 2025. None of the anticipated
work from these four significant long-term progressive design-build
projects is yet reflected in backlog. As well, a consortium in
which Aecon is a participant was selected in April 2024 by the
Province of British Columbia as the preferred proponent to design
and build the Surrey Langley SkyTrain Stations project in British
Columbia.
In the Concessions segment, 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 as
well as private sector development expertise and investment to
support aging infrastructure, mobility, connectivity and population
growth. The GO Expansion On-Corridor Works project noted above and
the Oneida Energy Storage project, a consortium in which Aecon
Concessions is an equity partner that will deliver a 250 megawatt /
1,000 megawatt-hour energy storage facility near Nanticoke Ontario,
are examples of the role Aecon’s Concessions segment is playing in
developing, operating, and maintaining assets related to this
transition. In addition, in the first quarter of 2024, an Aecon-led
consortium was selected by the U.S. Virgin Islands Port Authority
to redevelop the Cyril E. King Airport in St. Thomas and the Henry
E. Rohlsen Airport in St. Croix under a collaborative Design,
Build, Finance, Operate and Maintain Public-Private Partnership
model.
Global and Canadian economic conditions
impacting inflation, interest rates, and overall supply chain
efficiency have stabilized, and these factors 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 Company’s March 31, 2024 MD&A, and
Section 13 “Risk Factors” in the 2023 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.
At March 31, 2024, Aecon held cash and cash
equivalents, excluding balances held by joint operations, of $123
million. In addition, at March 31, 2024, Aecon had committed
revolving credit facilities of $850 million, of which $76 million
was drawn, and $7 million was utilized for letters of credit. The
Company has no debt or working capital credit facility maturities
until 2027, except equipment loans and leases in the normal
course.
Revenue in 2024 will be impacted by the three
strategic transactions completed in 2023, the substantial
completion of several large projects in 2023, and the five major
projects currently in the development phase by consortiums in which
Aecon is a participant being delivered using the progressive
design-build models which are expected to move into the
construction phase in 2025. The completion and satisfactory
resolution of claims on the four legacy projects with the
respective clients remains a critical focus for the Company and its
partners, while the remainder of the business continues to perform
as expected, supported by the strong level of backlog, and the
strong demand environment for Aecon’s services, including recurring
revenue programs.
CONSOLIDATED RESULTS
The consolidated results for the three months
ended March 31, 2024 and 2023 are available at the end of this news
release.
CONSOLIDATED BALANCE SHEET
|
|
|
March 31 |
|
December 31 |
|
$ thousands |
|
2024 |
|
2023 |
| |
|
|
|
|
| Cash and cash equivalents |
$ |
433,470 |
$ |
645,784 |
| Other current assets |
|
1,849,726 |
|
1,827,472 |
| Property, plant and
equipment |
|
296,584 |
|
251,899 |
| Other long-term assets |
|
466,933 |
|
470,473 |
| Total
Assets |
$ |
3,046,713 |
$ |
3,195,628 |
| |
|
|
|
|
| Current portion of long-term
debt - recourse |
$ |
38,624 |
$ |
42,608 |
| Preferred Shares of Aecon
Utilities |
|
156,690 |
|
157,110 |
| Other current liabilities |
|
1,484,204 |
|
1,583,549 |
| Long-term debt - recourse |
|
107,175 |
|
106,770 |
| Other long-term
liabilities |
206,553 |
241,265 |
| |
|
|
|
|
| Equity |
|
1,053,467 |
|
1,064,326 |
| Total Liabilities and
Equity |
$ |
3,046,713 |
$ |
3,195,628 |
| |
|
|
|
|
CONFERENCE CALL
A conference call and live webcast has been
scheduled for 9 a.m. (Eastern Time) on Thursday, April 25, 2024. A
live webcast of the conference call can be accessed using this link
and will be available at www.aecon.com/InvestorCalendar.
Participants can also dial-in to the conference call and
pre-register using this link. After registering, an email will be
sent, including dial-in details and a unique access code required
to join the live call. Please ensure you have registered at least
15 minutes prior to the conference call time.
An accompanying presentation of the first
quarter 2024 financial results will also be available after market
close on April 24, 2024 at www.aecon.com/investing. For those
unable to attend, a replay will be available within one hour
following the live webcast and conference call at the same webcast
link above.
AECON 2024 ANNUAL MEETING OF
SHAREHOLDERS
Aecon’s Annual Meeting of Shareholders will be
held on Tuesday, June 4, 2024. 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 North American
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,
management, and operations and maintenance services through its
Concessions segment. Join our online community on X, LinkedIn,
Facebook, and Instagram @AeconGroupInc.
For further
information:
Adam BorgattiSVP, Corporate Development and Investor
Relations416-297-2600ir@aecon.com
Nicole CourtVice President, Corporate
Affairs416-297-2600corpaffairs@aecon.com
NON-GAAP AND SUPPLEMENTARY FINANCIAL
MEASURES
The 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 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 statement means 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 in the
Company’s consolidated statements of income and are not meant to be
a substitute for other subtotals or totals presented in accordance
with GAAP, but rather should be evaluated in conjunction with such
GAAP 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.
Management uses the above non-GAAP ratio to
analyze and evaluate operating performance. The most directly
comparable measures calculated in accordance with GAAP are gross
profit margin and operating margin.
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, 2024 and
2023:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
Three months ended March 31, 2024 |
Three months ended March 31, 2023 |
|
|
|
|
Construction |
Concessions |
Other costs and eliminations |
Consolidated |
Construction |
Concessions |
Other costs and eliminations |
Consolidated |
|
|
|
Operating profit (loss) |
$ |
7.4 |
|
$ |
1.1 |
|
$ |
(12.7 |
) |
$ |
(4.2 |
) |
$ |
16.2 |
|
$ |
2.4 |
|
$ |
(13.0 |
) |
$ |
5.6 |
|
|
|
|
Depreciation and amortization |
|
18.6 |
|
|
0.1 |
|
|
0.2 |
|
|
18.8 |
|
|
17.0 |
|
|
5.6 |
|
|
0.3 |
|
|
22.9 |
|
|
|
|
(Gain) on sale of assets |
|
(1.1 |
) |
|
- |
|
|
- |
|
|
(1.1 |
) |
|
(12.2 |
) |
|
- |
|
|
- |
|
|
(12.2 |
) |
|
|
|
(Income) loss from projects accounted for using the equity
method |
|
(0.1 |
) |
|
(2.2 |
) |
|
- |
|
|
(2.3 |
) |
|
0.2 |
|
|
(3.5 |
) |
|
- |
|
|
(3.3 |
) |
|
|
|
Equity Project
EBITDA(1) |
|
2.9 |
|
|
18.7 |
|
|
- |
|
|
21.6 |
|
|
1.2 |
|
|
10.4 |
|
|
- |
|
|
11.6 |
|
|
|
|
Adjusted
EBITDA(1) |
$ |
27.8 |
|
$ |
17.6 |
|
$ |
(12.5 |
) |
$ |
32.9 |
|
$ |
22.4 |
|
$ |
14.9 |
|
$ |
(12.7 |
) |
$ |
24.6 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
31, 2024 and 2023:
|
$ millions |
|
|
|
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 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 |
$ |
2.9 |
|
$ |
14.9 |
|
$ |
- |
|
$ |
17.8 |
$ |
1.0 |
|
$ |
10.4 |
|
$ |
- |
|
$ |
11.4 |
|
|
|
Depreciation and amortization |
|
- |
|
|
3.8 |
|
|
- |
|
|
3.8 |
|
0.2 |
|
|
- |
|
|
- |
|
|
0.2 |
|
|
|
Equity Project
EBITDA(2) |
$ |
2.9 |
|
$ |
18.7 |
|
$ |
- |
|
$ |
21.6 |
$ |
1.2 |
|
$ |
10.4 |
|
$ |
- |
|
$ |
11.6 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer to Note 9 “Projects
Accounted for Using the Equity Method” in March 31, 2024 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 known and unknown risks, assumptions 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; backlog and estimated duration; the impact of
certain contingencies on Aecon (see: Section 10.2 “Contingencies”
in the Company’s March 31, 2024 MD&A); the uncertainties
related to the unpredictability of global economic conditions; its
belief regarding the sufficiency of its current liquidity position
including sufficiency of its cash position, unused credit capacity,
and cash generated from its operations; its strategy of seeking to
differentiate its service offering and execution capability and the
expected results therefrom; its efforts to maintain a conservative
capital position; expectations regarding the pipeline of
opportunities available to Aecon; statements regarding the various
phases of projects for Aecon; its strategic focus on projects
linked to decarbonization, energy transition and sustainability and
the opportunities arising therefrom; the diversification of Aecon’s
geographic presence; opportunities to add to the existing portfolio
of Canadian and international concessions in the next 12 to 24
months; Oaktree’s minority investment in Aecon Utilities, the
expected benefits thereof and results therefrom, including the
acceleration of growth of Aecon Utilities in Canada and the U.S.;
the anticipated use of proceeds from Oaktree’s minority investment
in Aecon Utilities; and the expansion of Aecon Utilities’
geographic reach and range of services in the U.S. Forward-looking
statements may in some cases be identified by words such as
“believes,” “possible,” “maintain,” “continues,” “completing,”
“mitigating,” “anticipates,” “upon,” “commences,” “plans,”
“expects,” “outlook,” “potential,” “estimates,” “intends,” “seeks,”
“targets,” “strategy,” “indicative,” “may,” “will,” “should,”
“would,” “can,” and “could,” or negative or grammatical versions
thereof, 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 profitability
and margins; the risk of not being able to adequately diversify its
work portfolio; 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
will not realize the strategic rationale for the sale of the equity
interest in Skyport; the risk that Aecon will not realize the
opportunities presented by a transition to a net-zero economy;
risks associated with future pandemics and Aecon’s ability to
respond to and implement measures to mitigate the impact of such
pandemics; the risk that the strategic partnership with Oaktree
will not realize the expected results and may negatively impact the
existing business of Aecon Utilities; and the risk that Aecon
Utilities will not realize opportunities to expand its geographic
reach and range of services in the U.S.
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 Company’s Management’s
Discussion and Analysis for the fiscal quarter ended March 31, 2024
and Aecon’s 2023 Management’s Discussion and Analysis for the
fiscal year ended December 31, 2023 filed on SEDAR+
(www.sedarplus.ca). 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, 2024 AND 2023 |
| (in
thousands of Canadian dollars, except per share
amounts) |
| |
|
|
| |
March 31 |
|
March 31 |
|
| |
2024 |
|
2023 |
|
| |
|
|
|
|
| |
|
|
|
|
|
Revenue |
$ |
846,592 |
|
$ |
1,107,155 |
|
| Direct
costs and expenses |
|
(783,806 |
) |
|
(1,040,322 |
) |
|
Gross profit |
|
62,786 |
|
|
66,833 |
|
| |
|
|
|
|
| Marketing, general and
administrative expense |
|
(52,075 |
) |
|
(54,238 |
) |
| Depreciation and
amortization |
|
(18,843 |
) |
|
(22,924 |
) |
| Income from projects accounted
for using the equity method |
|
2,293 |
|
|
3,287 |
|
| Other
income |
|
1,658 |
|
|
12,636 |
|
|
Operating profit (loss) |
|
(4,181 |
) |
|
5,594 |
|
| |
|
|
|
|
| Finance income |
|
3,159 |
|
|
1,418 |
|
| Finance cost |
|
(5,672 |
) |
|
(16,924 |
) |
|
Loss before income taxes |
|
(6,694 |
) |
|
(9,912 |
) |
| Income
tax recovery |
|
577 |
|
|
474 |
|
|
Loss for the period |
$ |
(6,117 |
) |
$ |
(9,438 |
) |
| |
|
|
|
|
| |
|
|
|
|
| Basic loss per
share |
$ |
(0.10 |
) |
$ |
(0.15 |
) |
| Diluted loss per
share |
$ |
(0.10 |
) |
$ |
(0.15 |
) |
| |
|
|
|
|
Aecon (TSX:ARE)
Graphique Historique de l'Action
De Avr 2024 à Mai 2024
Aecon (TSX:ARE)
Graphique Historique de l'Action
De Mai 2023 à Mai 2024
