Aecon reports second quarter 2014 results and backlog of $2.7 billion

Aecon reports second quarter 2014 results and backlog of $2.7 billion 
TORONTO, Aug. 11, 2014 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported 
results for the second quarter of 2014. 
Teri McKibbon, President and Chief Executive Officer, Aecon Group Inc., said: 
"With our backlog growing in Infrastructure and recovering in Mining, and our 
Energy segment consistently delivering strong results, we maintain a positive 
outlook and anticipate making progress during the second half of 2014 towards 
our Adjusted EBITDA margin target of 9 per cent in 2015." 
Mr. McKibbon added: "As previously outlined, we anticipated results to be even 
stronger and more weighted to the second half of 2014 than is usually the 
case, and despite a softer second quarter in our Mining segment, our 
expectations for the second half remain positive. With the ramping up of 
substantial new projects - particularly in Infrastructure and Mining - the 
second half of 2014 has the potential to be the strongest half year that Aecon 
has ever achieved." 
HIGHLIGHTS 


        --  Revenue was $590 million for the second quarter of 2014
            compared to $698 million for the same period of 2013, largely
            due to lower revenue in Mining (as a result of lower volume of
            site installation work following the substantial completion of
            a significant project in 2013, and lower demand for contract
            mining services largely driven by temporary client production
            shutdowns in the oil sands during the second quarter).
        --  Adjusted EBITDA for the second quarter of 2014 was $13.8
            million compared to $36.7 million for the second quarter of
            2013 driven by the slower quarter in the Mining segment. For
            the first half of 2014, Adjusted EBITDA was $16.9 million
            compared to $25.4 million in the prior year.
        --  Backlog increased to $2.690 billion at June 30, 2014 from
            $1.773 billion at the end of 2013. This level is just $87
            million below Aecon's record high backlog.
        --  New contract awards of $1.969 billion were booked in the first
            six months of 2014 compared to $1.052 billion in the same
            period of 2013. At the end of the second quarter of 2014
            compared to the end of 2013, Infrastructure backlog increased
            to $1,486 million from $820 million, Energy backlog rose to
            $937 million as compared to $876 million, and Mining backlog
            grew to $267 million compared to $77 million.
        --  Subsequent to quarter end, Aecon was awarded approximately $280
            million for three large contracts - one award in each operating
            segment.
    CONSOLIDATED FINANCIAL HIGHLIGHTS(1)                                   
                                                                           
                                   Three months ended     Six months ended
    $ millions (except per share                       
    amounts)                               June 30               June 30
                                    2014        2013      2014        2013
                                                                           
    Revenue                      $  589.6   $   697.6 $ 1,051.4   $ 1,265.1
    Gross profit                     40.5        59.3      69.9        81.8
    Marketing, general and                                       
    administrative expenses        (40.3)      (37.8)    (81.3)      (82.6)
    Income from projects                                         
    accounted for using the
    equity method                     6.6         8.6      13.9        17.1
    Foreign exchange gain (loss)      0.1          -        0.6         0.1
    Gain (loss) on sale of                                       
    property, plant and
    equipment                       (0.5)         0.3     (0.6)         0.5
    Loss on disposal of a                                        
    subsidiary                         -           -      (2.6)          - 
    Depreciation and                                             
    amortization                   (14.1)      (14.3)    (31.0)      (31.8)
    Operating profit (loss)(2)      (7.8)        16.2    (31.0)      (14.9)
    Financing expense, net         (11.4)       (9.4)    (22.5)      (18.1)
    Fair value gain on                                           
    convertible debentures            2.3         2.6       0.6         0.4
    Profit (loss) before income                                  
    taxes                          (16.8)         9.4    (52.9)      (32.6)
    Income tax recovery                                          
    (expense)                         4.6       (1.5)      14.8        10.6
    Profit (loss)                $ (12.2)   $     7.9 $  (38.1)   $  (22.0)
                                                                           
    Profit (loss)                $ (12.2)   $     7.9 $  (38.1)   $  (22.0)
    Exclude:                                                               
    Fair value gain on                                           
    convertible debentures          (2.3)       (2.6)     (0.6)       (0.4)
    Income tax on fair value                                     
    gain                              0.6         0.7       0.2         0.1
    Adjusted profit (loss)(3)    $ (13.9)   $     6.0 $  (38.5)   $  (22.3)
                                                                           
    Gross profit margin              6.9%        8.5%      6.6%        6.5%
    MG&A as a percent of revenue     6.8%        5.4%      7.7%        6.5%
    Adjusted EBITDA(4)               13.8        36.7      16.9        25.4
    Adjusted EBITDA margin           2.3%        5.3%      1.6%        2.0%
    Operating margin               (1.3)%        2.3%    (3.0)%      (1.2)%
    Earnings (loss) per share -             $                    
    basic                        $ (0.23)        0.15 $  (0.72)   $  (0.42)
    Earnings (loss) per share -             $                    
    diluted                      $ (0.23)        0.13 $  (0.72)   $  (0.42)
                                                                           
    Adjusted earnings (loss) per            $                    
    share - basic(5)             $ (0.26)        0.11 $  (0.72)   $  (0.42)
    Adjusted earnings (loss) per            $                    
    share - diluted(5)           $ (0.26)        0.11 $  (0.72)   $  (0.42)
                                                                           
    Backlog                                           $   2,690   $   2,215
                                                                           
    (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

"While we were disappointed by the delay we experienced in securing the 
additional work we have now booked for our mining business and the temporary 
client production shutdowns in the oil sands during the second quarter, we 
move forward with confidence into the second half of 2014 with major new 
Infrastructure projects ramped up and significant mining work in hand. With 
$2.7 billion in backlog, which is close to a record, and importantly includes 
higher embedded margins, and the $280 million in contract awards announced 
today, we will remain focused on execution," said Teri McKibbon.

Revenue for the three and six months ended June 30, 2014 was lower by $108 
million and $214 million, respectively, compared to the same periods in 2013. 
In the Energy segment, revenue increased by $19 million in both the three and 
six month periods ended June 30, 2014 with the increases occurring mainly in 
utilities operations. Offsetting these increases were declines in Mining, with 
the largest decreases occurring in mining construction services, and in the 
Infrastructure segment, primarily in the buildings operations of social 
infrastructure and in transportation operations.

Adjusted EBITDA( )for the second quarter of 2014 decreased to $13.8 million 
(margin of 2.3 per cent) compared to an Adjusted EBITDA of $36.7 million 
(margin of 5.3 per cent) for the second quarter of 2013.  For the six month 
period, Adjusted EBITDA was $16.9 million (margin of 1.6 per cent) compared to 
$25.4 million (margin of 2.0 per cent).

Operating profit for the three months ended June 30, 2014 decreased by $24.0 
million over the same quarter in 2013, leading to an operating loss of $7.8 
million, while the operating loss for the six months ended June 30, 2014 of 
$31.0 million increased by $16.1 million compared to the same period in 2013.

Unfavourably impacting operating profit for the three months ended June 30, 
2014 was a decrease in gross profit of $18.8 million compared to the same 
period in 2013. This decrease occurred substantially in the Mining segment, 
primarily from lower revenue and margins in mining construction services, 
following the completion of certain large projects during the past twelve 
months and lower margin in contract mining.  Although Mining secured a number 
of new contract awards during the second quarter, the impact of these new 
projects will not be realized until the second half of the year.

Backlog increased to $2.690 billion at June 30, 2014 from $2.215 billion at 
the end of the second quarter in 2013.

New contract awards of $1,101 million were booked in the second quarter of 
2014 compared to $840 million in the same period of 2013. New contract awards 
of $1,969 million were booked in the first six months of 2014 compared to 
$1,052 million in the same period of 2013.

Subsequent to quarter end, Aecon was awarded approximately $280 million in 
three large contracts - one award in each operating segment.

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        Six months ended
    $ millions                       June 30                 June 30
                              2014        2013        2014        2013
                                                                       
    Revenue                $  191.1   $   239.9   $   297.6   $   389.7
    Gross profit           $    6.8   $     7.9   $     0.4   $   (7.3)
    Adjusted EBITDA        $  (4.8)   $   (1.5)   $  (21.6)   $  (31.2)
    Operating loss         $  (8.9)   $   (5.7)   $  (32.1)   $  (39.3)
                                                                       
    Adjusted EBITDA margin   (2.5)%      (0.6)%      (7.2)%      (8.0)%
    Operating margin         (4.7)%      (2.4)%     (10.8)%     (10.1)%
    Backlog                                       $   1,486   $   1,027
                                                                       
                                                                 

For the three months ended June 30, 2014, revenue in the Infrastructure 
segment of $191 million decreased by $49 million, or 20%, over the same period 
last year.  Most of the decrease in revenue occurred in social infrastructure 
operations ($56 million), primarily from less ongoing work in buildings 
operations in Ontario compared to the same period in the prior year and from 
the closure of the Seattle operations during the first quarter of 2014. In 
addition, transportation operations also experienced slightly lower revenue of 
$5 million due to lower volume in Ontario. These reductions were partially 
offset by an increase in revenue from heavy civil operations ($13 million) 
largely as a result of the commencement of work on new projects, including the 
John Hart Generating Station and the Region of Waterloo Light Rail Transit 
projects which were awarded in 2014.

For the three months ended June 30, 2014, operating loss in the Infrastructure 
segment of $8.9 million was $3.2 million higher than the same period in 2013. 
Most of the increase in operating loss occurred in social infrastructure 
operations ($5 million) primarily from lower revenue. In heavy civil 
operations, operating profit declined by $1 million as improvements in gross 
profit were offset by higher bid costs in the period. These operating profit 
decreases were partially offset by an increase of $3 million in transportation 
operations, primarily from margin improvements in Ontario.

Infrastructure backlog at June 30, 2014 was $1,486 million, which is $459 
million higher than the same time last year with the largest increases in 
backlog occurring in heavy civil and transportation operations.  New contract 
awards totalled $400 million in the second quarter of 2014 and $963 million 
for the first six months, compared to $248 million and $297 million, 
respectively, in the prior year. The increase in new awards reflects the 
impact of several large project awards announced this year including the John 
Hart Generating Station project in heavy civil; the Region of Waterloo Light 
Rail Transit project; the York Viva Bus Rapid Transit project and the Second 
Concession Road project for York Region in transportation; along with Regina's 
new Wastewater Treatment Plant in social infrastructure.

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     Six months ended
    $ millions                       June 30              June 30
                             2014         2013      2014       2013
                                                                    
    Revenue                $ 294.1     $  275.0   $ 542.3   $  523.0
    Gross profit           $  31.0     $   29.8   $  49.6   $   36.1
    Adjusted EBITDA        $  18.1     $   15.4   $  21.9   $    5.3
    Operating profit       $  14.8     $   12.7   $  15.0   $  (0.7)
                                                                    
    Adjusted EBITDA margin    6.1%         5.6%      4.0%       1.0%
    Operating margin          5.0%         4.6%      2.8%     (0.1)%
    Backlog                                       $   937   $    978
                                                                    
                                  

Revenue for the three months ended June 30, 2014 of $294 million in the Energy 
segment was $19 million, or 7%, higher than the same period of 2013. Revenue 
from utilities operations increased by $15 million, primarily from a higher 
volume of pipeline work in Western Canada and from local utility work in 
Ontario. Revenue also increased in industrial operations by $4 million, 
primarily from fabrication projects in Atlantic Canada and increased heat 
recovery steam generator sales in IST, but partly offset by lower fabrication 
revenue in Western Canada following the completion of certain projects in the 
second half of 2013.

For the three months ended June 30, 2014, operating profit of $14.8 million 
was $2.1 million higher than the same period last year.  An increase in 
operating profit in utilities was mainly due to a higher volume of work as 
noted above, partly offset by a decline in industrial, where volume driven 
increases in Atlantic Canada and IST were offset by lower profit in Western 
Canada in the second quarter.

Backlog at June 30, 2014 of $937 million was $41 million lower than the same 
time last year. The decrease in backlog results primarily from a reduction in 
utilities backlog due to the work off of significant pipeline projects in 
Western Canada. New contract awards of $411 million in the second quarter of 
2014 were $41 million lower than in the same period in 2013, although new 
awards of $604 million for the first six months of 2014 were $101 million 
higher than the same period in 2013. Most of the increase in new awards in the 
first half of the year occurred in utilities operations in Western Canada and 
in industrial operations in Central Canada from fabrication and power projects.

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     Six months ended
    $ millions                        June 30              June 30
                               2014        2013       2014      2013
                                                                     
    Revenue                 $  106.9   $   192.1   $  214.4   $ 363.6
    Gross profit            $    2.8   $    21.8   $   20.2   $  53.2
    Adjusted EBITDA         $  (3.7)   $    17.9   $    8.2   $  44.9
    Operating profit (loss) $  (9.6)   $    12.6   $  (5.2)   $  31.4
                                                                     
    Adjusted EBITDA margin    (3.5)%        9.3%       3.8%     12.3%
    Operating margin          (8.9)%        6.6%     (2.4)%      8.6%
                                                                     
    Backlog                                        $    267   $   210
                                                                 
                                                                 

Revenue of $107 million in the Mining segment for the three months ended June 
30, 2014 was $85 million or 44% lower than the same period of 2013. The 
majority of the decrease ($78 million) was due to lower volume of site 
installation work in the commodity mining sector following the substantial 
completion of a significant project in Western Canada in 2013. The remainder 
of the decrease was largely the result of lower demand during the quarter for 
contract mining services in the oil sands ($26 million) offset partly by 
increased volume of $19 million from civil and foundations work related to 
mining projects. Lower demand for contract mining services was largely driven 
by temporary client production shutdowns in the oil sands during the second 
quarter. Although a number of new contract awards were secured in the Mining 
segment during the second quarter, the impact of these new projects will not 
be realized until the second half of the year.

For the three months ended June 30, 2014, an operating loss of $9.6 million 
was $22.2 million worse than the same period last year. A decrease in 
operating profit in the commodity mining sector resulted primarily from the 
above-noted lower volume in Western Canada and operating profit also decreased 
from lower volume and margin in contract mining operations in Western Canada.

Backlog at June 30, 2014 of $267 million was $57 million higher than the same 
time last year. New contract awards of $294 million in the second quarter of 
2014 were $142 million higher than in the same period in 2013, and new awards 
of $404 million for the first six months of 2014 were $141 million higher than 
the same period in 2013. The increase in new awards in the first half of the 
year was largely due to project awards in the contract mining sector in 
Western Canada including a large mining site development project award at the 
Fort Hills oil sands project in Alberta, and new awards with a potash client 
in the commodity mining sector.

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     Six months ended
    $ millions                        June 30              June 30
                              2014         2013      2014       2013
                                                                     
    Revenue                 $   0.8   $      0.8   $   1.4   $    1.4
    Gross profit            $ (0.2)   $    (0.1)   $ (0.4)   $  (0.2)
    Income from projects
    accounted for using the
    equity
    method                  $   6.2   $      5.9   $  11.7   $   12.9
    Adjusted EBITDA         $  12.1   $     11.8   $  23.8   $   20.4
    Operating profit        $   5.1   $      5.1   $   9.7   $   11.3
                                                                     
                                                                

Revenue reported in the Concessions segment for both the three months ended 
June 30, 2014 and June 30, 2013, was $0.8 million, while revenue for both the 
six months ended June 30, 2014 and June 30, 2013, was $1.4 million.

For the three months ended June 30, 2014, operating profit of $5.1 million was 
consistent with the same period last year, while for the six months ended June 
30, 2014, operating profit of $9.7 million was $1.6 million lower than the 
same period last year. For both the second quarter and year-to-date results in 
2014, increases in revenue and Adjusted EBITDA from the new Quito airport 
concessionaire were offset by higher interest and amortization charges related 
to Quito operations. Following 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 as of that date.

OUTLOOK

"Aecon's position as Canada's premier construction and infrastructure 
development company is demonstrated by the contracts that we have been 
recently awarded.  We will remain focused on our business strategy and 
execution in order to translate the bid margin embedded in our backlog to the 
bottom line as well as being disciplined and diligent in pursuing the 
substantial opportunities on the horizon," said John M. Beck, Aecon's 
Executive Chairman.

CONSOLIDATED RESULTS

The consolidated results for the three and six months ended June 30, 2014 and 
2013 are available at the end of this news release.
                                                                 
    Balance Sheet Highlights                                             
                                                     June 30     Dec. 31
      $ thousands (unaudited)                          2014        2013
                                                                         
    Cash and cash equivalents and restricted cash $   108,483 $   244,536
    Other current assets                              850,909     885,052
    Property, plant and equipment                     499,559     512,257
    Other long-term assets                            385,950     351,741
    Total Assets                                  $ 1,844,901 $ 1,993,586
                                                                         
    Current liabilities                           $   830,461 $   940,356
    Long-term debt                                    116,357     123,128
    Convertible debentures (long term portion)        252,674     248,817
    Other long-term liabilities                        95,722      94,677
                                                                         
    Equity                                            549,687     586,608
    Total Liabilities and Equity                  $ 1,844,901 $ 1,993,586
                                                   

CONFERENCE CALL
A conference call has been scheduled for Tuesday, August 12, 2014 at 10 a.m. 
(ET) to discuss Aecon's 2014 second quarter financial results. Participants 
should dial 416-359-3130 or 1-800-706-9230 at least 10 minutes prior to the 
conference time.  For those unable to attend the call, a replay will be 
available after 11:30 a.m. at 1-800-558-5253 or 416-626-4100 until midnight on 
August 19, 2014. The reservation number is 21721355.

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 For the six months ended
                           June 30        June 30     June 30       June 30
                              2014           2013        2014          2013
                                                                           
    Revenue            $   589,566 $      697,641 $ 1,051,439 $   1,265,080
    Direct costs and     (549,096)      (638,316)   (981,520)   (1,183,250)
    expenses
    Gross profit            40,470         59,325      69,919        81,830
                                                                           
    Marketing, general    (40,286)       (37,785)    (81,282)      (82,599)
    and administrative
    expenses
    Depreciation and      (14,136)       (14,267)    (30,964)      (31,778)
    amortization
    Income from              6,578          8,637      13,899        17,059
    projects accounted
    for using the
    equity method
    Other income             (407)            267     (2,546)           564
    (loss)
    Operating profit       (7,781)         16,177    (30,974)      (14,924)
    (loss)
                                                                           
    Finance income             302            821         906         1,353
    Finance costs         (11,660)       (10,182)    (23,407)      (19,459)
    Fair value gain on       2,302          2,576         597           420
    convertible
    debentures
    Profit (loss)         (16,837)          9,392    (52,878)      (32,610)
    before income
    taxes
    Income tax               4,622        (1,505)      14,762        10,585
    recovery (expense)
    Profit (loss) for  $  (12,215) $        7,887 $  (38,116) $    (22,025)
    the period
                                                                           
    Basic earnings     $    (0.23) $         0.15 $    (0.72) $      (0.42)
    (loss) per share
    Diluted earnings   $    (0.23) $         0.13 $    (0.72) $      (0.42)
    (loss) per share
                                                               



SOURCE  Aecon Group Inc. 
Vince Borg Senior Vice President, Corporate Affairs Aecon Group Inc. 
416-297-2615 vborg@aecon.com 
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CO: Aecon Group Inc.
ST: Ontario
NI: CST ERN CONF  
-0- Aug/11/2014 21:00 GMT
 
 
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