Mr. Jean-Louis Servranckx reports

AECON REPORTS SECOND QUARTER 2022 RESULTS

Aecon Group Inc. has released its results for the second quarter of 2022 with 22-per-cent year-to-date growth in revenue and backlog of $6.6-billion as at June 30, 2022.

"Demand for Aecon's services across Canada continues to be strong, particularly in smaller and medium-sized projects," said Jean-Louis Servranckx, president and chief executive officer, Aecon Group. "As we navigate through broader economic challenges in the short term, we are focused on ensuring solid execution on our projects and selectively adding to backlog through a disciplined bidding approach that supports long-term margin improvement, supported by a diversified and strong level of backlog, growing recurring revenue programs and continuing recovery in traffic at the Bermuda airport."

Highlights

• Revenue for the three months ended June 30, 2022, of $1,123-million was $152-million, or 16 per cent higher compared with the same period in 2021.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $38.5-million for the three months ended June 30, 2022 (margin of 3.4 per cent), compared with adjusted EBITDA of $61.3-million (margin of 6.3 per cent) in the same period in 2021, and operating profit of $5.1-million compared with operating profit of $34.6-million in the same period in 2021.
• After adjusting for the impact of amounts related to the Canada Emergency Wage Subsidy (CEWS) program in the second quarter of 2021, adjusted EBITDA of $38.5-million decreased by $10.1-million and operating profit of $5.1-million decreased by $16.8-million for the three months ended June 30, 2022, compared with the same period in 2021.
• Net loss of $6.4-million (diluted loss per share of 10 cents) for the three months ended June 30, 2022, compared with a net profit of $17.6-million (diluted earnings per share of 27 cents) during the same period in 2021, before adjusting for the impact of CEWS in 2021.
• Reported backlog as at June 30, 2022, of $6,605-million compares with backlog of $6,524-million as at June 30, 2021.
• New contract awards of $1,305-million were booked in the second quarter of 2022 compared with $1,582-million in the same period in 2021. Year-to-date new awards of $2,517-million increased by $722-million compared with $1,795-million in the prior period.
• Connect Cite, a 50/50 general partnership between Aecon and EBC in which Aecon is the lead partner, finalized a $219-million contract with ADM Aeroports de Montreal to build the Montreal-Trudeau International Airport Reseau express metropolitain (REM) station project in Quebec, with additional scope and related pricing being finalized through a collaborative process.
• Aecon-Graham joint venture, a 50/50 consortium, was awarded a $273-million design-build contract for the Buffalo Pound Water Treatment Plant Renewal Project in Saskatchewan.
• As previously noted, ONxpress Transportation Partners, a consortium in which Aecon holds a 50-per-cent interest in a civil joint venture, which is undertaking construction, and a 28-per-cent interest in a 25-year operations and maintenance partnership, executed an agreement with Metrolinx and Infrastructure Ontario to deliver the multibillion-dollar GO Rail Expansion On-Corridor Works project in the Greater Golden Horseshoe Area. The contract begins with a two-year collaborative development phase to finalize the scope, commercial structure and pricing of various elements of the project. Certain construction and early works activities will commence during this phase, with operations and maintenance anticipated to commence in the second quarter of 2024. Further information on the contract value and schedule will be disclosed once the development phase is completed.
• Subsequent to quarter-end, Aecon was named one of the Corporate Knights 2022 Best 50 Corporate Citizens in Canada, recognizing corporate sustainability leadership and progress in environmental, social and governance (ESG) performance relative to industry peers.

Revenue for the three months ended June 30, 2022, of $1,123-million was $152-million, or 16 per cent higher compared with the second quarter of 2021. In the construction segment, higher revenue of $150-million was driven by increases in civil ($52-million), industrial ($40-million), utilities ($26-million), nuclear ($25-million) and urban transportation solutions ($7-million). In the concessions segment, higher revenue of $2-million was primarily due to an increase in commercial flight operations at the Bermuda International Airport.

Operating profit of $5.1-million for the three months ended June 30, 2022, decreased by $29.5-million compared with an operating profit of $34.6-million in the same period in 2021. The largest element of the period-over-period change was lower gross profit of $14.4-million. Included in gross profit in the second quarter of 2021 was a net positive impact from subsidy related to the Canada Emergency Wage Subsidy (CEWS) program ($12.7-million in the three-month period ended June 30, 2021), recorded as cost recovery within gross profit in the construction segment. After adjusting for the impact of CEWS amounts reported in the second quarter of 2021, gross profit in the second quarter of 2022 decreased by $1.7-million compared with the same period in 2021. In the construction segment, gross profit decreased by $2.6-million primarily from lower gross profit margin in urban transportation solutions driven by an unfavourable margin adjustment on a light rail transit (LRT) project in the quarter, as well as from lower gross profit margin in civil and nuclear operations. These decreases were partially offset by higher volume in each operating sector within the construction segment and higher gross profit margin in industrial and utilities operations. In the concessions segment, gross profit increased by $700,000, primarily from an improvement in results from airport operations at the Bermuda International Airport.

MG&A (marketing, general and administrative expense) for the three months ended June 30, 2022, increased by $8.4-million compared with the same period in 2021, primarily due to higher personnel costs, project pursuit and bid costs, and other discretionary costs. MG&A as a percentage of revenue for the second quarter increased from 4.6 per cent in 2021 to 4.7 per cent in 2022.

Reported backlog as at June 30, 2022, of $6,605-million compares with backlog of $6,524-million as at June 30, 2021. New contract awards of $1,305-million were booked in the second quarter of 2022 compared with $1,582-million in the same period in 2021.

Dividend

Aecon's next quarterly dividend of 18.5 cents per share will be paid on Oct. 4, 2022, to shareholders of record as of Sept. 23, 2022.

Outlook

Demand for Aecon's services across Canada continues to be strong, particularly in smaller and medium-sized projects, as evidenced by year-to-date revenue growth of 22 per cent and higher new project awards of 40 per cent. In addition, during the second quarter, an Aecon consortium was selected to deliver the transformative, multibillion-dollar long-term GO Rail Expansion On-Corridor Works project in Ontario under a progressive design, build, operate and maintain contract model which begins with a two-year development phase leading into the main construction scope, and also encompasses a 25-year operations and maintenance component. Aecon is also prequalified on a number of project bids due to be awarded during the next 12 months and has a strong pipeline of opportunities to further add to backlog over time. With backlog of $6.6-billion and recurring revenue programs continuing to see robust demand, driven by the utilities sector and continuing recovery in airport traffic in Bermuda, Aecon is confident in strong revenue growth over the next few years.

While volatile global and Canadian economic conditions are impacting inflation, interest rates and overall supply chain efficiency, these factors have largely been and will continue to be reflected in the pricing and commercial terms of the company's recent and prospective project awards and bids. However, certain continuing joint venture projects that were bid some years ago have experienced impacts related, in part, to those factors, that will require satisfactory resolution of claims with the respective clients -- see herein regarding the risk on four large fixed-price legacy projects entered into in 2018 or earlier by joint ventures in which Aecon is a participant.

In the construction segment, with strong demand, growing recurring revenue programs and diverse backlog in hand, Aecon is focused on ensuring solid execution on its projects and selectively adding to backlog through a disciplined bidding approach that supports long-term margin improvement in this segment.

In the concessions segment, in addition to expecting a gradual recovery in travel through the Bermuda International Airport during 2022 and 2023, there are a number of opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months, including in innovative projects with private sector clients that support a collective focus on sustainability and the transition to a net-zero economy.

As of June 30, 2022, Aecon had a committed revolving credit facility of $600-million, of which $220-million was drawn and $3-million was utilized for letters of credit. The company has no debt or working capital credit facility maturities until the second half of 2023, except equipment loans and leases in the normal course.

Consolidated results

The consolidated results for the three and six months ended June 30, 2022, and 2021 are available at the end of this news release.

Conference call

A conference call and live webcast has been scheduled for 10 a.m. (Eastern Time) on Friday, July 29, 2022. Participants should dial 1-833-950-0062 or 1-226-828-7575 at least 10 minutes prior to the conference time. The conference ID is 646601. An accompanying presentation of the second quarter 2022 financial results will be available after market close on July 28, 2022, at the company website.

A live webcast of the conference call will also be available at the company website.

Participants should join the webcast at least 15 minutes prior to the conference time to register and install any necessary software. For those unable to attend the call, a replay will be available after 2 p.m. on July 29, 2022, at 1-866-813-9403 or 1-929-458-6194, or on-line until midnight on Aug. 29, 2022. The access code is 082578. A replay of the webcast will also be available within 24 hours following the call.

About Aecon Group Inc.

As a Canadian leader in construction and infrastructure development with global expertise, Aecon strives to be the No. 1 Canadian infrastructure company and is proud to be recognized as one of the best employers in Canada. Aecon safely, profitably and sustainably delivers integrated solutions to private-sector and public-sector clients through its construction segment in the civil, urban transportation, nuclear, utility and industrial sectors, and provides project development, financing, investment and management services through its concessions segment.

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