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News » Canada » Aecon reports improved backlog and margins » published 8 Mar 2018

Aecon reports improved backlog and margins

Aecon’s full-year results for 2017 show growth in the year-end backlog, an improved margin and significant new project awards though a drop in operating profit.

John Beck Above: John Beck

“Aecon’s 2017 results point to the resilience of our business model and the stability provided by Aecon’s diversified strategy,” said president and chief executive officer John Beck. “This past year was a transitional one for Aecon, highlighted by its proposed new partnership with CCCI, which will position Aecon well for growth moving forward. As we look to the year ahead, Aecon remains focused on continuing to grow backlog, further improving margins and successfully executing projects for our clients.”

The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of CA$156.5m (margin of 5.6%) for 2017 compared to a margin of 4.9% in 2016.

The backlog as at 31 December 2107 of CA$4,247m compared to backlog of CA$4,204m at the end of 2016.

However, the CA$2,806m revenue for the year ended 31 December was lower by CA$407m, or 13%, compared to 2016.

Despite a CA$6.5m increase in gross profit and adjusted EBITDA margin improvement, operating profit for the year ended 31 December 2017 decreased by CA$33.5m compared to 2016.  

The reported backlog as at 31 December of CA$4,247m compares to backlog of CA$4,204m as at 31 December 2016. New contract awards of CA$2,849m were booked in 2017 compared to CA$4,156m in 2016. The variance in new contract awards is primarily due to the CA$1,375m award for the Darlington nuclear refurbishment project recorded in January 2016.

Major recent wins included the selection of a partnership, in which Aecon has a 30% share, as preferred proponent for the Site C generating station and spillways civil works project with an expected contract award this quarter. Last month, an Aecon joint venture, NouvLR Partnership, was selected as preferred proponent on the Réseau express métropolitain Montréal light rail transit project with an expected contract award in the second quarter of this year.

On 26 October 2017, the company entered into an arrangement agreement under which CCCI has agreed, subject to satisfaction of customary conditions, to acquire all Aecon’s shares.  

“The overall outlook for 2018 remains positive with areas of strength in Aecon’s business expected to outweigh the impact of fewer opportunities in commodity and oil related markets,” said Beck. “The commitment to increase infrastructure investment by all levels of government across Canada as well as significant opportunities in utilities, P3’s, and power, including nuclear, should allow Aecon to leverage its strengths in these areas to grow its revenue, improve Adjusted EBITDA margin and increase backlog in 2018. All four segments continue to engage in robust bidding activity and the pursuit of large-scale, complex projects with key clients.”

Revenue in the infrastructure segment of CA$950m in 2017 was CA$81m, or 8%, lower than 2016. The largest decrease occurred in transportation operations (CA$78m) as a result of lower roadbuilding activity in Ontario, which was impacted by unusually wet weather in the first half of the year and the completion of a significant project that provided higher revenue in the previous year.  Heavy civil revenue was also lower than the previous year (CA$14m) as increased activity in Ontario from light rail projects was more than offset by lower volume in Western Canada on hydroelectric related work. Partially offsetting these decreases was an increase in social infrastructure operations (CA$11m), due mostly to the commencement of the Bermuda International Airport Redevelopment Project in early 2017, partially offset by lower volume from water treatment plant related work in Western Canada.

Operating profit in the infrastructure segment of CA$19.7m in 2017 decreased by CA$12.7m compared to 2016.  The infrastructure backlog as at 31 December 2017 was CA$1,995m, which is CA$331m higher than the same time last year. The increase was driven by social infrastructure (CA$373m), due mostly to the award of the Bermuda International Airport Redevelopment Project and mechanical projects in Western Canada, and by transportation operations (CA$126m), due to a higher backlog of road construction work in Western Canada. These increases were partially offset by a decrease in heavy civil operations (CA$168m) as the execution of light rail and other existing projects in 2017 exceeded new awards in the sector. New contract awards in 2017 totalled CA$1,282m compared to CA$501m in the prior year. The increase in new awards year-over-year is due mainly to the areas discussed above.

Revenue in 2017 of CA$1,472m in the energy segment was CA$115m, or 8%, higher than in 2016 as higher revenue in utilities (CA$158m) was partially offset by lower volume in industrial operations (CA$43m). The higher utilities revenue was driven primarily by an increase in pipeline projects, as well as increases in the electricity distribution and residential telecommunications sectors. Revenue was lower in industrial operations due to decreases in field construction, fabrication and module assembly volume in Western Canada (CA$187m), partially offset by higher volume in Eastern Canada (CA$144m) where increased activity in the nuclear sector was only partially offset by lower gas distribution and fabrication work.

For the year ended 31 December 2017, energy’s operating profit of CA$55.4m increased by CA$17.7m when compared to 2016. The year-over-year increase was largely driven by an increase in utilities operations (CA$17.8m) from higher volume and improved gross profit margin. The backlog at 31 December 2017 of CA$2,115m was CA$257m lower than the same time last year, with a decrease in industrial operations (CA$275m) and an increase in utilities operations (CA$18m).  



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This article was published on 8 Mar 2018 (last updated on 8 Mar 2018).

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