Aecon reports third quarter 2012 results and record backlog

TORONTO, Nov. 5, 2012 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported 
results for the third quarter of 2012 that showed margin trends continued to 
be positive while revenue was in line with the same period a year ago. EBITDA 
increased by 19 per cent in the third quarter and by 39 per cent year to date 
(excluding the impact of operations from the Cross Israel Highway prior to 
sale in 2011 and the gain on sale from selling the interest in those 
operations and other assets). Aecon's backlog for the nine months of 2012 
rose to a record $2.8 billion compared to the $2.2 billion in the 2011 period 
- an increase of 25 per cent. 
"We are making steady progress in financial performance as a result of 
leveraging scope and scale with a focus on execution. Aecon's EBITDA has 
improved significantly over 2011 and we remain steadfast in continuing the 
overall trend of improving margins and earnings going into 2013," said John M. 
Beck, Chairman and Chief Executive Officer. "We are very pleased to announce 
a record backlog of $2.8 billion - a solid demonstration of the significant 
demand for our services despite the economic climate." 
HIGHLIGHTS 


    --  Due to higher margins, gross profit for the three and nine
        months ended September 30, 2012, increased by $9.1 million to
        $105.4 million, and $43.3 million to $204.7 million,
        respectively, compared to the same periods in 2011.
    --  Revenue for the third quarter was in line with last year, and
        for the nine months ended September 30, 2012, was lower by $108
        million, or 5 per cent compared to the same period in 2011. 
        The combination of strong growth in Aecon Mining operations and
        the ramp-up of new Industrial projects in the third quarter was
        offset by lower revenue in Social Infrastructure due to the
        planned refocusing and redefined mandate of buildings
        operations and lower volume in Transportation.  Lower revenue
        from Concessions was recorded due to the sale of the operator
        of Cross Israel Highway in the third quarter of 2011.
    --  Adjusted EBITDA (excluding gains on sale of assets and
        investments) for Q3 2012 was $68.7 million (adjusted margin of
        8.2 per cent) versus $60.2 million for Q3 2011 (adjusted margin
        of 7.2 per cent).  For the nine months, adjusted EBITDA was
        $94.5 million (adjusted margin of 4.7 per cent) versus $74.6
        million (adjusted margin of 3.5 per cent).
    --  Adjusted profit attributable to shareholders of $34.6 million
        ($0.50 per diluted share) for Q3 2012 was recorded compared to
        $40.5 million ($0.49 per diluted share) in Q3 2011.
    --  Record backlog of $2.8 billion at September 30, 2012 versus
        $2.2 billion at September 30, 2011 - a 25 per cent increase -
        was driven by $938 million in new contract awards in the third
        quarter of 2012 as compared to $869 million in 2011. For the
        first nine months of 2012, new awards rose to $2.4 billion as
        compared to $1.9 billion in the same period of 2011 - an
        increase of 27%.
    --  Subsequent to quarter end, Aecon announced that it achieved
        substantial completion on the construction of the Quito
        International Airport project as scheduled.
    --  On October 18, 2012, for the sixth consecutive year Aecon was
        named to the Top 50 Best Employers in Canada in the Maclean's
        magazine/Aon Hewitt national survey; Aecon was also ranked in
        Canada's Top 100 Employers by The Globe and Mail.
    --  Our positive outlook is affirmed, based on record backlog.

CONSOLIDATED FINANCIAL HIGHLIGHTS                                      
                                                                       
                         Three months ended        Nine months ended   

$ millions (except per                       
share amounts)((1))          September 30             September 30     
                          2012        2011         2012         2011   
                                                                       

Revenue                $ 834.3    $  835.4    $ 1,998.1    $ 2,105.8   

Gross profit             105.4        96.3        204.7        161.4   

Marketing, general and                                                 
administrative
expenses                 (39.4)      (37.0)      (118.7)       (97.2)

Income from                                                            
construction projects
accounted for using
the equity method          3.0         2.4          8.7         10.3 

Foreign exchange gains                                                 
(losses)                  (0.3)       (1.5)        (0.2)         0.1 

Gain on sale of assets                                                 
and investments            0.3        14.3          0.8         14.9 

EBITDA((2))               69.0        74.5         95.3         89.5   

Depreciation and                                                       
amortization             (15.5)      (16.0)       (45.8)       (45.8)

Operating profit((3))     53.5        58.5         49.5         43.7   

Financing expense, net    (6.1)       (8.1)       (22.0)       (21.4)  

Fair value gain on                                                     
convertible debentures     1.7         1.7          0.3          4.5 

Profit before income                                                   
taxes                     49.0        52.0         27.8         26.8 

Income tax expense       (12.8)       (8.9)        (5.4)        (1.6)  

Profit attributable to                                                 
non-controlling
interests                 (0.3)       (1.5)        (0.8)        (4.3)

Profit attributable to                                                 
shareholders           $  35.9    $   41.7    $    21.6    $    20.9 
                                                                       

Adjusted profit                                                        
attributable to
shareholders((4))      $  34.6    $   40.5    $    21.4    $    17.7 
                                                                       

Adjusted EBITDA((5))   $  68.7    $   60.2    $    94.5    $    74.6   
                                                                       
                                                                       

Gross profit margin       12.6%       11.5%        10.2%         7.7%  

MG&A as a percent of                                                   
revenue                    4.7%        4.4%         5.9%         4.6%

EBITDA margin              8.3%        8.9%         4.8%         4.2%  

Adjusted EBITDA margin     8.2%        7.2%         4.7%         3.5%  

Operating margin           6.4%        7.0%         2.5%         2.1%  

Earnings per share -                                                   
basic                  $  0.68    $   0.76    $    0.41    $    0.38 

Earnings per share -                                                   
diluted                $  0.50    $   0.49    $    0.39    $    0.36 
                                                                       

Adjusted earnings per                                                  
share- basic((6))      $  0.66    $   0.74    $    0.40    $    0.32 

Adjusted earnings per                                                  
share- diluted((6))    $  0.50    $   0.49    $    0.38    $    0.32 
                                                                       

Backlog                                       $   2,777    $   2,215   
                                                                       

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

Backlog reached $2.8 billion at September 30, 2012, with $938 million in new 
contract awards booked in the third quarter compared to $2.2 billion and $869 
million booked in the third quarter of 2011. For the first nine months of 
2012, new contract awards rose to $2.4 billion compared to $1.9 billion in the 
same period of 2011 - an increase of $512 million or 27 per cent.

Not included in backlog, but important to Aecon's prospects due to the 
significant volume involved, is the expected revenue from Aecon's growing 
alliances and supplier-of-choice arrangements where the amount and/or value of 
work to be carried out is not specified. In 2011, this additional work 
represented approximately 20 per cent of overall revenue.

OPERATING AND FINANCIAL RESULTS

"We are pleased with the operational performance and the headway that all of 
our business units are making in execution, operational efficiencies and 
improvements, and in working collaboratively for the benefit of our diverse 
client base," said Teri McKibbon, Chief Operating Officer. "In particular, 
our Utilities and Mining businesses have continued to grow, Heavy Civil has a 
solid pipeline of opportunities, and the pace of work in the Industrial 
segment continues to pick up."

Aecon reports its results in three operating segments: Infrastructure, 
Industrial and Concessions.

INFRASTRUCTURE SEGMENT

The Infrastructure segment includes all aspects of civil construction from 
highways, bridges and tunnels to airports, marine facilities, transit and 
power projects as well as utilities and pipeline construction, buildings 
construction and mining operations.

Financial Highlights
                                                                       
                         Three months ended        Nine months ended   

$ millions((1))              September 30             September 30     
                          2012        2011         2012         2011   
                                                                       

Revenue                $ 558.2    $  587.4    $ 1,295.7    $ 1,351.6   

Gross profit           $  65.8    $   68.4    $   106.2    $    77.6   

EBITDA                 $  51.2    $   56.7    $    60.7    $    52.0   

Adjusted EBITDA        $  50.9    $   54.0    $    60.0    $    48.4   

Operating profit       $  40.5    $   45.0    $    28.5    $    19.3   
                                                                       

EBITDA margin              9.2%        9.7%         4.7%         3.8%  

Adjusted EBITDA margin     9.1%        9.2%         4.6%         3.6%  

Operating margin           7.3%        7.7%         2.2%         1.4%  

Backlog                                       $   1,959    $   1,689   
                                                                       

(1) Commencing in 2012, the Infrastructure segment includes Lockerbie &
    Hole Contracting (previously included in the Industrial segment),
    building on our 'One Aecon' business strategy where Aecon expects
    to realize synergies between Lockerbie & Hole Contracting and Aecon
    Buildings in the social infrastructure sector.
     

Third quarter 2012 revenue in the Infrastructure segment decreased by $29 
million, or 5 per cent, over the same period last year primarily due to three 
factors: 1) the mandate of our buildings operations has been refocused and 
redefined; 2) several large mechanical operations projects in Western Canada 
have been wound down this year; and 3) the municipal transportation market in 
Ontario and Alberta has been softer in the third quarter of 2012 versus the 
same period a year ago. The impact of these factors was partially offset by 
strong growth in volume in both Heavy Civil and Mining operations.

For the three months and nine months ended September 30, 2012, the operating 
profit (loss) in the Infrastructure segment increased/(decreased) over the 
same period last year as follows:
                                                                     
                           Three months ended     Nine months ended  

$ millions                     September 30          September 30    
                                                                     

Transportation           $              (6.6)   $            (12.8)  

Heavy Civil                             (1.9)                 (4.9)  

Utilities                                0.9                  (2.8)  

Mining                                                               

  Ongoing operations                     2.4                  25.5   

  Gain on sale of                       (2.9)                 (3.2)  
  equipment

Social Infrastructure                    3.5                   7.4   
                                                                     

Increase (decrease) in   $              (4.5)   $              9.2   
Infrastructure operating
profit

For the third quarter of 2012, operating profit in Social Infrastructure 
reflects an improvement in buildings operations compared to the third quarter 
of 2011 when margin reductions on several large projects were recorded. The 
improvement in Utilities primarily reflects higher current period volumes 
whereas in Mining, higher volumes and improved margins were achieved due to 
better equipment availability and mix of work. The decline in operating 
profit in Transportation reflects lower current period volumes, and in Heavy 
Civil, lower project margins and higher bid costs.

Infrastructure backlog at September 30, 2012 rose to $1,959 million - an 
increase of $270 million or 16 percent - as compared to $1,689 million in 
2011. New contract awards totaled $756 million in the third quarter of 2012 
and $1,739 million year to date, compared to $358 million and $1,011 million, 
respectively, in the prior year.

INDUSTRIAL SEGMENT

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

Financial Highlights
                                                                       
                   Three months ended             Nine months ended    

$ millions            September 30                  September 30       
                 2012           2011           2012           2011     
                                                                       

Revenue       $ 266.5        $ 226.4        $ 674.6        $ 688.0     

Gross profit  $  32.9        $  18.3        $  79.8        $  58.1     

EBITDA        $  18.8        $   2.7        $  39.6        $  20.8     

Adjusted      $  18.8        $   2.7        $  39.6        $  21.0     
EBITDA

Operating     $  16.9        $   0.8        $  34.0        $  14.5     
profit
                                                                       

EBITDA margin     7.0%           1.2%           5.9%           3.0%    

Adjusted          7.0%           1.2%           5.9%           3.1%    
EBITDA margin

Operating         6.3%           0.4%           5.0%           2.1%    
margin

Backlog                                     $   818        $   526     
                                                                       
                                                          

In the Industrial segment, third quarter 2012 revenue rose by $40 million, or 
18 per cent, compared to 2011, primarily as a result of increased module 
assembly, pipe fabrication and site construction work in Western Canada and 
from higher volumes in the commodities mining sector.

For the three and nine months ended September 30, 2012, the operating profit 
in the Industrial segment increased over the same period last year as follows:
                                                                   
                         Three months ended     Nine months ended  

$ millions                   September 30          September 30    
                                                                   
                                                                   

Heavy Industrial       $              17.0    $             24.0   
(Construction and
Fabrication)

IST                                   (0.9)                 (4.5)  

Increase in Industrial $              16.1    $             19.5   
operating profit

Most of the period-over-period increase in operating profit, for both the 
third quarter and year to date 2012, from Heavy Industrial operations resulted 
from higher volumes in the commodity mining sector and from improved margins 
in Western Canada.

Industrial backlog at September 30, 2012 of $818 million was $292 million 
higher - an increase of 56 per cent - than the same time last year. New 
contract awards amounted to $172 million in the third quarter of 2012 which 
were lower than in the third quarter of 2011.

CONCESSIONS SEGMENT

The Concessions segment includes the development, operation and financing of 
infrastructure projects by way of public-private partnership, 
build-own-operate-transfer or other alternative financing contract structures.

Financial Highlights
                                                                   
                         Three months ended     Nine months ended  

$ millions                   September 30          September 30    
                         2012         2011      2012        2011   
                                                                   

Revenue                $ 11.2    $    21.9    $ 31.6    $   70.6   

Gross profit           $  6.7    $     9.6    $ 18.7    $   25.5   

EBITDA                 $  5.8    $    20.6    $ 15.7    $   34.3   

Adjusted EBITDA        $  5.8    $     9.1    $ 15.7    $   22.7   

Operating profit       $  4.7    $    19.7    $ 12.8    $   31.7   
                                                                   

EBITDA margin            51.6%        94.1%     49.8%       48.5%  

Adjusted EBITDA margin   51.6%        41.4%     49.8%       32.2%  

Operating margin         42.1%        89.8%     40.5%       44.9%  
                                                                   

For the three and nine months ended September 30, 2012, the operating profit 
in the Concessions segment decreased over the same periods last year as 
follows:
                                                                       
                             Three months ended     Nine months ended  

$ millions                        September 30         September 30    
                                                                       

Quito Airport Concessionaire   $          (0.6)   $             (0.3)  

Cross Israel Highway                      (2.9)                 (7.1)  
Operator (sold in Q3, 2011)
and other

Gain on sale of investment               (11.5)                (11.5)  
in operator of CIH in 2011

Decrease in Concessions        $         (15.0)   $            (18.9)  
operating profit

The majority of the decrease in revenue and operating profit in the 
Concessions segment during the quarter and nine months ended September 30, 
2012 is a result of the sale in the third quarter of 2011 of Aecon's interest 
in the operator of the Cross Israel Highway.

The operating profit from the Quito airport concessionaire includes the 
results from operating the existing Quito airport while the new Quito airport 
is being constructed. Subsequent to the end of the third quarter, Aecon 
announced that it achieved substantial completion on the construction of the 
Quito International Airport project as scheduled - a significant milestone on 
a complex greenfield project. The Company built the airport as part of a 50/50 
joint venture with Andrade Gutierrez Constructores S.A., a construction 
company based in Brazil. Work on the engineer/procure/construct contract 
involved all of the critical infrastructure required to make the airport 
operational, including the passenger terminal, runways, taxiways, control 
tower and ancillary buildings such as cargo and catering, ground service 
facilities, as well as the supply and integration of the IT, navigation and 
security systems. In addition to having been granted the Substantial 
Completion Certificate, the airport has received the Certificate to Operate 
from the Ecuadorian Civil Aviation Authority.

DIVIDEND PAYMENT

As previously disclosed, the annual dividend for 2012 was increased from 20 
cents per share to 28 cents per share, paid on a quarterly basis. The third 
quarterly dividend payment of $0.07 was paid on October 1, 2012 to 
shareholders of record on September 21, 2012.

CONSOLIDATED RESULTS

The consolidated results for the three and nine months ended September 30 of 
2012 and 2011 are available at the end of this news release.

BALANCE SHEET HIGHLIGHTS                                         
                                       September 30   December 31

  $ thousands (unaudited)                   2012          2011 
                                                                 

Cash, restricted cash and marketable $     135,861  $    222,015 
securities

Other current assets                       958,201       842,234 

Property, plant and equipment              500,968       482,148 

Other long-term assets                     475,677       437,698 

Total Assets                         $   2,070,707  $  1,984,095 
                                                                 

Current liabilities                  $     881,098  $    791,836 

Non-recourse project debt                  151,331       137,078 

Long-term debt                             141,002       142,581 

Convertible debentures                     255,620       251,429 

Other long-term liabilities                149,351       171,294 
                                                                 

Equity                                     492,305       489,877 

Total Liabilities and Equity         $   2,070,707  $  1,984,095 

CONFERENCE CALL

A conference call has been scheduled for Tuesday, November 6, 2012 at 10:30 
a.m. (ET) to discuss Aecon's 2012 third quarter financial results. 
Participants should dial 416-641-6202 or 1-800-381-7839 at least 10 minutes 
prior to the conference time. A replay will be available after 12:30 p.m. at 
1-800-558-5253 or 416-626-4100 until midnight on November 13, 2012. The 
reservation number is 21608116.

ABOUT AECON

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

STATEMENT ON FORWARD-LOOKING INFORMATION

The information in this press release includes certain forward-looking 
statements. These "forward-looking" statements are based on currently 
available competitive, financial and economic data and operating plans but are 
subject to risks and uncertainties. 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: interest and foreign exchange 
rates, global equity and capital markets, business competition and operational 
and reputational risks, including Large Project Risk and Contractual 
Factors. Readers are referred to the specific risk factors relating to and 
affecting Aecon's business and operations as filed by Aecon pursuant to 
applicable securities laws. 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. Forward-looking statements, 
may in some cases be identified by words such as "will," "plans," "believes," 
"expects," "anticipates," "estimates," "projects," "intends," "should" or the 
negative of these terms, or similar expressions. 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
                                                                      

(in thousands of Canadian dollars, except per share amounts)
(unaudited)
                                                                      
                                                                      
                      For the three months   For the nine months ended
                                     ended
                    September September 30  September 30  September 30
                           30
                        2012         2011          2012          2011 
                                                                      

Revenue           $  834,274  $   835,371  $  1,998,095  $  2,105,827 

Direct costs and    (728,874)    (739,076)   (1,793,445)   (1,944,438)
expenses

Gross profit         105,400       96,295       204,650       161,389 
                                                                      

Marketing,           (39,439)     (36,986)     (118,734)      (97,214)
general and
administrative
expenses

Depreciation and     (15,531)     (16,044)      (45,790)      (45,776)
amortization

Income from            3,033        2,406         8,683        10,316 
construction
projects
accounted for
using the equity
method

Other income               7       12,811           665        14,970 

Operating profit      53,470       58,482        49,474        43,685 
                                                                      

Finance income           250          838         1,640         5,144 

Finance costs         (6,337)      (8,964)      (23,677)      (26,565)

Fair value gain        1,666        1,665           316         4,544 
on convertible
debentures

Profit before         49,049       52,021        27,753        26,808 
income taxes

Income tax           (12,841)      (8,869)       (5,365)       (1,620)
expense

Profit for the    $   36,208  $    43,152  $     22,388  $     25,188 
period

Attributable to:                                                      

  Shareholders    $   35,905  $    41,659  $     21,554  $     20,854 

  Non-controlling        303        1,493           834         4,334 
  interests
                  $   36,208  $    43,152  $     22,388  $     25,188 
                                                                      
                                                                      

Basic earnings    $     0.68  $      0.76  $       0.41  $       0.38 
per share

Diluted earnings  $     0.50  $      0.49  $       0.39  $       0.36 
per share



Vince Borg Senior Advisor, Corporate Affairs Aecon Group Inc. 416-297-2615 
vborg@aecon.com

SOURCE: Aecon Group Inc.

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CO: Aecon Group Inc.
ST: Ontario
NI: CST ERN DIV CONF 

-0- Nov/05/2012 22:31 GMT


 
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