Aecon reports first quarter 2014 results

TORONTO, May 7, 2014 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported 
results for the first quarter 2014 including higher Adjusted EBITDA( )of $3.1 
million as compared to an Adjusted EBITDA loss of $11.3 million in the first 
quarter of 2013, and backlog of $2.2 billion at March 31, 2014, as compared to 
$1.8 billion at December 31, 2013. 
"Our focus on execution is yielding results and Aecon's first quarter 
represents a solid start to the year. We anticipate that revenue and therefore 
profits will be even more weighted to the second half of 2014 than is usually 
the case due to the ramp up of significant new projects currently underway," 
said John M. Beck, Chairman and Chief Executive Officer, Aecon Group Inc. 
"With Aecon's balanced and diversified portfolio of work in three core market 
sectors of infrastructure, energy and mining, and our strong backlog of higher 
margin work, we maintain a positive outlook and anticipate making continued 
progress through 2014 to our Adjusted EBITDA margin target of 9 per cent in 
2015." 
HIGHLIGHTS 


        --  Adjusted EBITDAfor the first quarter of 2014 increased to $3.1
            million (margin of 0.7 per cent) on revenue of $462 million as
            compared to an Adjusted EBITDA loss of $11.3 million (margin
            loss of 2.0 per cent) on revenue of $567 million for the first
            quarter of 2013.
        --  Backlog of $2.2 billion at March 31, 2014 was approximately
            $400 million higher than at year end 2013.
        --  New contracts in the first quarter of 2014 totaled $867 million
            compared to $212 million in the first quarter of 2013.
        --  Subsequent to quarter end, Aecon and its joint venture partner
            announced that they were selected for the York Viva Bus Rapid
            Transit project in Ontario, with an expected $130 million in
            revenue to Aecon's account.  Aecon was also awarded a $94
            million contract for the reconstruction and widening of Second
            Concession Road for York Region.
        --  Increased annual dividend took effect with the first quarterly
            payment of $0.09 per share (increased from $0.08 per share)
            paid on April 1, 2014 to shareholders of record on March 21,
            2014.
      CONSOLIDATED FINANCIAL HIGHLIGHTS(1)                                 
                                                                           
                                                       Three months ended  
      $ millions (except per share amounts)                   March 31     
                                                        2014        2013   
                                                                           
      Revenue                                        $  461.9   $   567.4  
      Gross profit                                       29.4        22.5  
      Marketing, general and administrative                                
      expenses                                         (41.0)      (44.8)
      Income from projects accounted for using the                         
      equity method                                       7.3         8.4
      Foreign exchange gains                              0.4         0.1  
      Gain on sale of assets                               -          0.2  
      Loss on disposal of a subsidiary                  (2.6)          -   
      Depreciation and amortization                    (16.8)      (17.5)  
      Operating loss(2)                                (23.2)      (31.1)  
      Financing costs, net                             (11.1)       (8.7)  
      Fair value loss on convertible debentures         (1.7)       (2.2)  
      Loss before income taxes                         (36.0)      (42.0)  
      Income tax recovery                                10.1        12.1  
      Loss                                           $ (25.9)   $  (29.9)  
                                                                           
      Loss                                           $ (25.9)   $  (29.9)  
      Exclude:                                                             
      Fair value loss on convertible debentures           1.7         2.2  
      Income tax on fair value loss                     (0.5)       (0.6)  
      Adjusted loss(3)                               $ (24.7)   $  (28.3)  
                                                                           
      Gross profit margin                                6.4%        4.0%  
      MG&A as a percent of revenue                       8.9%        7.9%  
      Adjusted EBITDA(4)                                  3.1      (11.3)  
      Adjusted EBITDA Margin                             0.7%      (2.0)%  
      Operating margin                                 (5.0)%      (5.5)%  
      Loss per share - basic                         $ (0.49)   $  (0.56)  
      Loss per share - diluted                       $ (0.49)   $  (0.56)  
                                                                           
      Adjusted loss per share - basic(5)             $ (0.47)   $  (0.53)  
      Adjusted loss per share - diluted(5)           $ (0.47)   $  (0.53)  
                                                                           
      Backlog                                        $  2,178   $   2,073  
                                                                           
    (1)      This press release presents certain non-GAAP and additional
             GAAP (GAAP refers to
             Canadian Generally Accepted Accounting Principles) financial
             measures to assist
             readers in understanding the Company's performance.  Non-GAAP
             financial measures
             are measures that either exclude or include amounts that are
             not excluded or included
             in the most directly comparable measures calculated and
             presented in accordance with
             GAAP in the consolidated financial statements. Further details
             on non-GAAP and
             additional GAAP measures are included in the Company's
             Management's Discussion
             and Analysis and available through the System for Electronic
             Document Analysis and
             Retrieval at www.sedar.com.
    (2)      "Operating profit (loss)" represents the profit (loss) from
             operations, before net financing
             expense, income taxes and non-controlling interests.
    (3)      "Adjusted profit (loss)" represents the profit (loss) adjusted
             to exclude the after-tax fair
             value gain (loss) on the embedded derivative portion of
             convertible debentures.
    (4)      "Adjusted EBITDA" represents operating profit (loss) adjusted
             to exclude depreciation
             and amortization, the gain (loss) on sales of assets and
             investments, and net income
             (loss) from projects accounted for using the equity method,
             but including "JV EBITDA"
             from projects accounted for using the equity method.
    (5)      "Adjusted earnings (loss) per share" represents earnings
             (loss) per share calculated
             using adjusted profit (loss).

OPERATING AND FINANCIAL RESULTS

"With an improved mix of work in our Infrastructure segment, a strong market 
environment for our Energy segment, and targeted opportunities in Mining, we 
move forward in 2014 with a focused, disciplined approach to a robust pipeline 
of opportunities," said Teri McKibbon, Aecon's President and Chief Operating 
Officer.  "The scope of opportunities suited to Aecon's capabilities covers 
the breadth of Canada."

Revenue of $462 million in the first quarter of 2014 compared to revenue of 
$567 million in the same period of 2013. Lower revenue resulted primarily from 
decreases in the Mining segment, primarily from site installation work, and in 
the Infrastructure segment mostly in buildings operations.

Adjusted EBITDA( )for the first quarter of 2014 increased to $3.1 million 
(margin of 0.7 per cent) compared to an Adjusted EBITDA loss of $11.3 million 
(margin loss of 2.0 per cent) for the first quarter of 2013.

Operating loss for the period of $23.2 million improved by $7.9 million 
compared to the same period in 2013. Included in the quarter-over-quarter 
improvement is the impact of a $19 million provision on a specific project 
reported in the first quarter of 2013, offset to some extent by the impact of 
lower volume in the Mining segment in the first quarter of 2014.

Backlog was $2,178 million at March 31, 2014, compared to $2,073 million at 
March 31, 2013. New contract awards of $867 million were booked in the first 
quarter of 2014 compared to $212 million in the first quarter of 2013. Among 
other contracts, the following major projects were booked in the first quarter:
        --  John Hart Generating Station in British Columbia: a joint
            venture of Aecon (60%) and SNC-Lavalin Constructors Pacific
            Inc. (40%) for the civil construction scope, with Aecon's
            portion of the contract representing $225 million; and
        --  Waterloo Region Light Rapid Transit: a joint venture
            partnership of Aecon (51%) and Kiewit (49%), with a backlog
            value to Aecon's account of approximately $250 million.

Subsequent to quarter end, Aecon and its joint venture partner (Dufferin 
Construction) announced that they were selected for the York Viva Bus Rapid 
Transit project in Ontario, with an expected $130 million in revenue to 
Aecon's account.  Aecon was also awarded a $94 million contract for the 
reconstruction and widening of Second Concession Road for York Region. Work on 
this project will commence in the second quarter and is expected to be 
complete in the third quarter of 2016.

Not included in backlog, but important to Aecon's prospects due to the 
increasingly significant volume involved, is the expected recurring 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.  This 
recurring revenue currently represents approximately 25 per cent of annual 
revenue.

REPORTING SEGMENTS

Aecon reports its financial performance on the basis of four segments: 
Infrastructure, Energy, Mining, and Concessions.

INFRASTRUCTURE SEGMENT

The Infrastructure segment includes all aspects of the construction of both 
public and private infrastructure, primarily in Canada, and on a selected 
basis, internationally.  The Infrastructure segment focuses primarily on the 
transportation, heavy civil and social infrastructure markets.
      Financial Highlights                          
                               Three Months Ended   
      $ millions                       March 31     
                                 2014        2013   
                                                    
      Revenue                $   106.5   $   149.7  
      Gross profit           $   (6.3)   $  (15.1)  
      Adjusted EBITDA        $  (16.7)   $  (29.7)  
      Operating loss         $  (23.3)   $  (33.6)  
                                                    
      Adjusted EBITDA margin   (15.7)%     (19.8)%  
      Operating margin         (21.8)%     (22.5)%  
      Backlog                $   1,277   $   1,021  
                                                    

In the first quarter of 2014, revenue in the Infrastructure segment of $107 
million was $42 million lower, or 29 per cent, over the same period last year. 
 Approximately half of the decrease in revenue occurred in social 
infrastructure operations, primarily from less ongoing work in buildings 
operations in Ontario compared to the prior year and from the closure of the 
Seattle operations during the first quarter of 2014.  In addition, heavy civil 
and transportation operations also experienced a decrease in revenue during 
the first quarter of 2014 as many large heavy civil projects were nearing 
completion, and a severe winter in Ontario and other timing issues affected 
road building work.

Operating loss in the Infrastructure segment of $23.3 million improved by 
$10.3 million over the same period in the prior year.  The largest improvement 
occurred in transportation operations primarily from the impact in the first 
quarter of 2013 of the segment's $9.7 million share of a specific project 
provision.

Infrastructure backlog at March 31, 2014 was $1,277 million, $256 million 
higher than the same time last year with most of the increase occurring in 
heavy civil operations.  New contract awards totaled $563 million in the first 
quarter of 2014 compared to $49 million in the same period in the prior year, 
with significant project awards received in 2014 for the John Hart Generating 
Station and Waterloo Region Light Rail Transit Project.

ENERGY SEGMENT

The Energy segment encompasses a full suite of service offerings to the energy 
market including industrial construction and manufacturing activities such as 
in-plant construction, site construction and module assembly. The Energy 
segment focuses primarily on the following sectors: oil and gas, power 
generation, pipelines, utilities, and energy support services.
      Financial Highlights                          
                                Three months ended  
      $ millions                       March 31     
                                2014         2013   
                                                    
      Revenue                 $ 248.2   $    248.0  
      Gross profit            $  18.6   $      6.3  
      Adjusted EBITDA         $   3.9   $   (10.1)  
      Operating profit (loss) $   0.2   $   (13.4)  
                                                    
      Adjusted EBITDA margin     1.6%       (4.1)%  
      Operating margin           0.1%       (5.4)%  
      Backlog                 $   821   $      801  
                                                    

Revenue in the first quarter of 2014 of $248 million in the Energy segment was 
in line with the same period of 2013, as increases from utilities operations 
were offset by lower revenue from industrial operations.

Operating profit in the Energy segment of $0.2 million was $13.6 million 
higher than the same period last year.  The quarter-over-quarter improvement 
is partially due to the Energy segment's $9.7 million share of a specific 
project provision in the first quarter of 2013. The remaining increase is 
mainly due to increased volume and margin from power generation projects in 
Central Canada and from higher volume in Atlantic Canada.

Backlog at March 31, 2014 of $821 million for the segment was $20 million 
higher than the same time last year with most of the increase occurring in 
industrial operations in Western Canada, primarily as a result of project 
awards for site construction projects in the oil sands during the past year, 
offset by lower backlog in utilities operations due to the work-off of 
pipeline projects. New contract awards of $193 million in the first quarter of 
2014 were $142 million higher than in the same period in 2013.

MINING SEGMENT

The Mining segment offers turn-key services consolidating Aecon's mining 
capabilities and services across Canada, including both mine site 
installations and contract mining.  This segment offers construction services 
that span the scope of a project's life cycle: from overburden removal and 
resource extraction, to processing and environmental reclamation.
      Financial Highlights                         
                               Three months ended  
      $ millions                      March 31     
                               2014         2013   
                                                   
      Revenue                $ 107.5   $    171.5  
      Gross profit           $  17.4   $     31.4  
      Adjusted EBITDA        $  11.9   $     27.0  
      Operating profit       $   4.3   $     18.7  
                                                   
      Adjusted EBITDA margin   11.1%        15.7%  
      Operating margin          4.0%        10.9%  
      Backlog                $    80   $      251  
                                                   

Revenue in the first quarter of 2014 of $108 million in the Mining segment was 
$64 million lower than in the same period of 2013.  Substantially all of the 
revenue decrease was from a lower volume of site installation work in the 
commodity mining sector following the completion of a substantial project 
during 2013.

For the three months ended March 31, 2014, operating profit of $4.3 million 
was $14.4 million lower than the same period last year.  The majority of the 
period-over-period decrease in operating profit resulted from the above noted 
lower volume of site installation work in the commodity mining sector.

Backlog at March 31, 2014 of $80 million was $171 million lower than the same 
time last year.  New contract awards of $111 million in the first quarter of 
2014 were $1 million lower than in the same period in 2013.

CONCESSIONS SEGMENT

The Concessions segment includes the development, financing, construction and 
operation of infrastructure projects by way of build-operate-transfer, 
build-own-operate-transfer and other public-private partnership contract 
structures.
      Financial Highlights                                               
                                                     Three Months Ended  
      $ millions                                            March 31     
                                                     2014         2013   
                                                                         
      Revenue                                      $   0.6   $      0.6  
      Gross profit                                 $ (0.2)   $    (0.1)  
      Income from projects accounted for using the                       
      equity
      method                                       $   5.5   $      7.0
      Adjusted EBITDA                              $  11.7   $      8.7  
      Operating profit                             $   4.5   $      6.2  
                                                                         

Revenue reported in the Concessions segment for the three months ended March 
31, 2014 and 2013, was $0.6 million.

For the three months ended March 31, 2014, operating profit of $4.5 million 
was $1.7 million lower than the same period last year as increases in revenue 
and Adjusted EBITDA from the new Quito airport concessionaire were offset by 
higher interest and amortization charges related to Quito operations. With the 
opening of the new Quito airport on February 20, 2013, the project commenced 
expensing interest (whereas prior to the opening of the new airport, interest 
was being capitalized) and began amortizing airport assets that were put into 
service.  From an operating profit perspective, the first quarter of 2013 
included approximately one month of interest and amortization expense related 
to the new airport, whereas the first quarter of 2014 includes a full three 
months of interest and amortization charges.

DIVIDEND

As previously announced, the annual dividend to be paid to all shareholders of 
Aecon Common shares is $0.36 per share (up from $0.32 per share) to be paid in 
four quarterly payments of $0.09 per share (up from $0.08 per share).  The 
first increased quarterly payment was paid on April 1, 2014 to shareholders of 
record on March 21, 2014.

CONSOLIDATED RESULTS

The consolidated results for the three months ended March 31, 2014 and 2013 
are available at the end of this news release.
    Balance Sheet Highlights                                             
                                                     March 31     Dec. 31
      $ thousands (unaudited)                            2014        2013
                                                                         
    Cash and cash equivalents and restricted cash $   150,585 $   244,536
    Other current assets                              836,334     885,052
    Property, plant and equipment                     501,809     512,257
    Other long-term assets                            380,705     351,741
    Total Assets                                  $ 1,869,433 $ 1,993,586
                                                                         
    Current liabilities                           $   840,935 $   940,356
    Long-term debt                                    114,970     123,128
    Convertible debentures (long term portion)        250,855     248,817
    Other long-term liabilities                        94,629      94,677
                                                                         
    Equity                                            568,044     586,608
    Total Liabilities and Equity                  $ 1,869,433 $ 1,993,586

CONFERENCE CALL

A conference call has been scheduled for Thursday, May 8, 2014 at 9:30 a.m. 
(ET) to discuss Aecon's 2014 first quarter financial results. Participants 
should dial 416-981-9011 or 1-800-734-8507 at least 10 minutes prior to the 
conference time.  A replay will be available after 11:30 a.m. at 
1-800-558-5253 or 416-626-4100 until midnight on May 15, 2014. The reservation 
number is 21713584.

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 ended
                                                    March 31       March 31
                                                        2014           2013
               
    Revenue                                      $   461,873 $      567,439
    Direct costs and expenses                      (432,424)      (544,934)
    Gross profit                                      29,449         22,505
                                                                           
    Marketing, general and administrative           (40,996)       (44,814)
    expenses
    Depreciation and amortization                   (16,828)       (17,511)
    Income from projects accounted for using the       7,321          8,422
    equity method
    Other income (loss)                              (2,139)            297
    Operating loss                                  (23,193)       (31,101)
                                                                           
    Finance income                                       604            532
    Finance costs                                   (11,747)        (9,277)
    Fair value gain on convertible debentures        (1,705)        (2,156)
    Loss before income taxes                        (36,041)       (42,002)
    Income tax recovery                               10,140         12,090
    Loss for the period                          $  (25,901) $     (29,912)
                                                                           
    Basic loss per share                         $    (0.49) $       (0.56)
    Diluted loss per share                       $    (0.49) $       (0.56)



SOURCE  Aecon Group Inc. 
Vince Borg Senior Vice President, Corporate Affairs Aecon Group Inc. 
416-297-2615 vborg@aecon.com 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/May2014/07/c7179.html 
CO: Aecon Group Inc.
ST: Ontario
NI: CST ERN DIV CONF  
-0- May/07/2014 21:01 GMT
 
 
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