TORONTO, Oct. 31, 2024 (GLOBE NEWSWIRE) -- Aecon Group Inc. (TSX: ARE) ("Aecon” or the "Company”) today reported results for the third quarter of 2024.
"With backlog of $6.0 billion and strong demand for Aecon's services, Aecon is well-positioned to achieve revenue growth commencing in 2025 and over the next few years,” said Jean-Louis Servranckx, President and Chief Executive Officer, Aecon Group Inc. "We continue to be focused on embracing opportunities linked to the energy transition and in select U.S. and international markets, while pursuing and delivering the majority of our work in established markets and under more collaborative project delivery models. We are also focused on making strategic investments in our operations to support access to new markets and increase operational effectiveness.”
HIGHLIGHTS
All quarterly financial information contained in this news release is unaudited.
- Revenue for the three months ended September 30, 2024 of $1,275 million was $36 million, or 3%, higher compared to the same period in 2023.
- Operating profit of $80.9 million (operating margin(3) of 6.3%) compared to operating profit of $140.1 million for the same period in 2023 (operating margin of 11.3%). Lower period-over-period operating profit was primarily due to a gain on the sale of a 49.9% interest in the Bermuda International Airport concessionaire ("Skyport”) of $139.0 million in the third quarter of 2023.
- Adjusted EBITDA(1)(2) of $126.9 million for the three months ended September 30, 2024 (Adjusted EBITDA margin(3) of 10.0%) compared to Adjusted EBITDA of $32.0 million (Adjusted EBITDA margin of 2.6%) in the same period in 2023. The increase in the quarter was largely due to an improvement from the four fixed priced legacy projects which recognized negative gross profit related to two of the four projects in the third quarter of 2023 of $91.1 million compared to $nil in the third quarter of 2024. These four fixed price legacy projects are discussed in Section 5 "Recent Developments” and Section 10.2 "Contingencies” in the September 30, 2024 MD&A, and Section 13 "Risk Factors” in the 2023 Annual MD&A.
- Profit Attributable to Shareholders(1)(2) of $56.5 million (diluted Earnings Per Share(1)(2) of $0.85) for the three months ended September 30, 2024 compared to Profit Attributable to Shareholders of $133.4 million (diluted Earnings Per Share of $1.63) in the same period in 2023.
- Adjusted Profit Attributable to Shareholders(1)(2) of $57.5 million (diluted Adjusted Earnings Per Share(1)(2) of $0.86) for the three months ended September 30, 2024 compared to Adjusted Profit Attributable to Shareholders of $133.7 million (diluted Adjusted Earnings Per Share of $1.63) in the same period in 2023.
- Reported backlog at September 30, 2024 of $5,980 million compared to backlog of $6,202 million at September 30, 2023. New contract awards of $1,069 million were booked in the third quarter of 2024 compared to $591 million in the same period in 2023.
- The Steam Generator Replacement Team, a consortium in which Aecon holds a 50% interest, was awarded a $700 million contract by Bruce Power to replace steam generators at Units 5, 7 and 8 of the Bruce Nuclear Generating Station in Ontario.
- South Fraser Station Partners, a consortium in which Aecon leads and holds a 33.3% interest, reached financial close for the $928 million stations contract on the Surrey Langley SkyTrain Project.
- Subsequent to quarter-end:
- Flatiron-Aecon Joint Venture, a consortium in which Aecon holds a 40% interest, executed a contract with the U.S. Army Corps of Engineers ("USACE”) to deliver the Howard A. Hanson Dam Additional Water Storage Fish Passage Facility project in Washington State under an Integrated Design and Construction contract model. The collaborative project begins with pre-construction services valued at US$16 million, with the construction phase expected to commence in late 2025 to early 2026. The USACE announced that the total contract price is valued at US$657 million.
- On October 28, 2024, Aecon announced it has entered into a definitive purchase agreement to acquire United Engineers & Constructors Inc. ("United”), a nuclear and conventional power contractor headquartered in New Jersey for a purchase price of US$33 million (the "Transaction”), payable in cash at closing. United's management and operational teams will join Aecon upon closing of the Transaction, which is subject to customary adjustments and closing conditions, including obtaining all necessary regulatory approvals.
CONSOLIDATED FINANCIAL HIGHLIGHTS
| Three months ended | Nine months ended | |||||||||||
| $ millions (except per share amounts) | September 30 | September 30 | ||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Revenue | $ | 1,275.3 | $ | 1,239.6 | $ | 2,975.7 | $ | 3,513.7 | ||||
| Gross profit | 150.4 | 45.7 | 75.3 | 157.7 | ||||||||
| Marketing, general and administrative expense | (55.8 | ) | (28.7 | ) | (156.1 | ) | (126.0 | ) | ||||
| Income from projects accounted for using the equity method | 5.8 | 5.2 | 19.6 | 13.3 | ||||||||
| Other income | 3.5 | 138.2 | 33.2 | 220.9 | ||||||||
| Depreciation and amortization | (23.0 | ) | (20.3 | ) | (61.6 | ) | (64.4 | ) | ||||
| Operating profit (loss) | 80.9 | 140.1 | (89.6 | ) | 201.3 | |||||||
| Finance income | 1.4 | 2.3 | 6.7 | 5.5 | ||||||||
| Finance cost | (4.5 | ) | (16.6 | ) | (16.8 | ) | (49.6 | ) | ||||
| Profit (loss) before income taxes | 77.8 | 125.8 | (99.7 | ) | 157.2 | |||||||
| Income tax (expense) recovery | (21.3 | ) | 7.6 | 26.1 | (5.0 | ) | ||||||
| Profit (loss) | 56.5 | 133.4 | (73.6 | ) | 152.2 | |||||||
| Non-controlling interests | - | - | - | - | ||||||||
| Profit (loss) attributable to shareholders | $ | 56.5 | $ | 133.4 | $ | (73.6 | ) | $ | 152.2 | |||
| Gross profit margin(4) | 11.8 | % | 3.7 | % | 2.5 | % | 4.5 | % | ||||
| MG&A as a percent of revenue(4) | 4.4 | % | 2.3 | % | 5.2 | % | 3.6 | % | ||||
| Adjusted EBITDA(2) | $ | 126.9 | $ | 32.0 | $ | 6.3 | $ | 73.2 | ||||
| Adjusted EBITDA margin(3) | 10.0 | % | 2.6 | % | 0.2 | % | 2.1 | % | ||||
| Operating margin(4) | 6.3 | % | 11.3 | % | (3.0 | )% | 5.7 | % | ||||
| Adjusted profit (loss) attributable to shareholders(2) | $ | 57.5 | $ | 133.7 | $ | (78.0 | ) | $ | 153.0 | |||
| Earnings (loss) per share - basic | $ | 0.90 | $ | 2.16 | $ | (1.18 | ) | $ | 2.47 | |||
| Earnings (loss) per share - diluted | $ | 0.85 | $ | 1.63 | $ | (1.18 | ) | $ | 1.94 | |||
| Adjusted earnings (loss) per share - basic(2) | $ | 0.92 | $ | 2.17 | $ | (1.25 | ) | $ | 2.48 | |||
| Adjusted earnings (loss) per share - diluted(2) | $ | 0.86 | $ | 1.63 | $ | (1.25 | ) | $ | 1.95 | |||
| Backlog (at end of period) | $ | 5,980 | $ | 6,202 | ||||||||
Revenue for the three months ended September 30, 2024 of $1,275 million was $36 million, or 3%, higher compared to the third quarter of 2023. In the Construction segment, revenue was higher by $57 million driven by increases in nuclear ($99 million), civil ($51 million), and utilities operations ($24 million), partially offset by lower revenue in industrial ($108 million) and urban transportation solutions ($9 million). In the Concessions segment, lower revenue of $23 million for the three months ended September 30, 2024 was primarily due to the use of the equity method of accounting in 2024 for Aecon's 50.1% retained interest in the Bermuda International Airport concessionaire ("Skyport”) following the sale of a 49.9% interest in Skyport in the third quarter of 2023. Intersegment revenue eliminations decreased by $2 million due to lower revenue between the Construction and Concessions segments.
Operating profit of $80.9 million for the three months ended September 30, 2024 decreased by $59.2 million compared to an operating profit of $140.1 million in the same period of 2023.
Lower period-over-period operating profit was largely driven by a decrease in other income of $134.7 million compared to the same period in 2023. This decrease was primarily due to the period-over-period impact of a gain from the sale of a 49.9% interest in Skyport of $139.0 million recognized in the third quarter of 2023. This decrease was partially offset in 2024 by higher period-over-period gains on the sale of property, equipment, and investments of $3.2 million.
Favourably impacting operating profit in the third quarter of 2024 was higher gross profit of $104.7 million. In the Construction segment, gross profit increased period-over-period by $118.2 million. This increase was largely due to an improvement from the four fixed priced legacy projects which recognized negative gross profit related to two of the four fixed priced legacy projects in the third quarter of 2023 of $91.1 million compared to $nil in the third quarter of 2024. These four fixed price legacy projects are discussed in Section 5 "Recent Developments” and Section 10.2 "Contingencies” in the Company's September 30, 2024 Management's Discussion and Analysis ("MD&A”), and Section 13 "Risk Factors” in the 2023 Annual MD&A. Other than the impact of these fixed price legacy projects, higher gross profit in the balance of the Construction segment in the third quarter of 2024 was primarily due to higher volume and increased gross profit margin in nuclear and utilities operations, and higher gross profit margin in urban transportation solutions and industrial, partially offset by lower gross profit margin in civil operations. In the Concessions segment, gross profit decreased by $13.3 million, primarily from the use of the equity method of accounting in 2024 for Aecon's 50.1% retained interest in Skyport following the sale of a 49.9% interest in this project in the third quarter of 2023.
Marketing, general and administrative expense ("MG&A”) for the three months ended September 30, 2024 increased by $27.1 million compared to the same period in 2023. Higher MG&A in the third quarter of 2024 was primarily due to higher personnel costs reflecting more typical levels in MG&A, ongoing investments to support growth, particularly in utilities operations with the expansion of its U.S. operations including from the Xtreme acquisition in 2024, as well as from higher acquisition related transaction costs ($5.6 million). MG&A as a percentage of revenue for the third quarter increased to 4.4% in 2024 from 2.3% in 2023.
Reported backlog at September 30, 2024 of $5,980 million compares to backlog of $6,157 million at December 31, 2023 and $6,202 million at September 30, 2023. New contract awards of $1,069 million were booked in the third quarter of 2024 compared to $591 million in the same period in 2023.
REPORTING SEGMENTS
Aecon reports its financial performance on the basis of two segments: Construction and Concessions, which are described in the Company's September 30, 2024 MD&A.
CONSTRUCTION SEGMENT
Financial Highlights
| Three months ended | Nine months ended | |||||||||||
| $ millions | September 30 | September 30 | ||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Revenue | $ | 1,272.7 | $ | 1,215.4 | $ | 2,968.0 | $ | 3,445.3 | ||||
| Gross profit | $ | 150.8 | $ | 32.5 | $ | 77.5 | $ | 125.8 | ||||
| Adjusted EBITDA(1) | $ | 114.1 | $ | 16.5 | $ | (30.8 | ) | $ | 34.4 | |||
| Operating profit (loss) | $ | 89.5 | $ | 1.3 | $ | (88.0 | ) | $ | 10.0 |
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