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  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/August2014/11/c9929.html  CO: Aecon Group Inc. ST: Ontario NI: CST ERN CONF  
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