CONSOLIDATED FINANCIAL HIGHLIGHTS
(1) This press release presents certain
non-GAAP and supplementary financial measures, as well as non-GAAP ratios to assist readers in
understanding the Company's performance (GAAP refers to Canadian Generally Accepted Accounting
Principles). Further details on these measures and ratios are included in
the “Non-GAAP and Supplementary Financial
Measures” section of this press release.
(2) This is a non-GAAP financial measure.
Refer to the “Non-GAAP and Supplementary Financial Measures” section of
this press release for more information on each non-GAAP financial measure.
(3) This is a non-GAAP ratio. Refer to the
“Non-GAAP and Supplementary Financial Measures” section of this press release for more information
on each non-GAAP ratio.
(4) This is a supplementary financial
measure. Refer to the “Non-GAAP and Supplementary Financial Measures” section of this press release
for more information on each supplementary financial measure.
Revenue for the year ended December 31, 2021 of $3,977 million was $334 million, or 9%, higher
compared to 2020. Revenue was higher in the Construction segment ($301 million) driven by higher revenue in
nuclear ($258 million) and utilities operations ($154 million). These increases were partially offset by
lower revenue in civil operations and urban transportation solutions ($84 million) and industrial operations
($27 million). In the Concessions segment, revenue was $29 million lower primarily due to decreased
construction activity related to the Bermuda International Airport Redevelopment Project, partially offset
by the gradual improvement of commercial flight operations at the Bermuda International Airport.
Furthermore, inter-segment revenue eliminations decreased by $62 million, primarily due to lower revenue
between the Concessions and Construction segments related to the Bermuda International Airport Redevelopment
Project.
Operating profit of $118.8 million for the year ended December 31, 2021 decreased by $31.1 million compared to operating profit of $149.9 million in 2020. Operating profit in 2020 and 2021 included net positive impacts from amounts related to the Canada Emergency Wage Subsidy (“CEWS”) program of $79.7 million and $31.9 million respectively, recorded in the Construction segment as cost recovery within gross profit ($89.4 million and $38.7 million respectively) and as an increase in marketing, general and administrative expense (“MG&A”) ($9.7 million and $6.8 million respectively). Contributing to the change in operating profit was a decrease in gross profit of $34.5 million. After adjusting for the net impact of CEWS amounts reported in 2020 and 2021, gross profit increased year-over-year by $16.2 million. In the Construction segment, gross profit decreased by $3.1 million, primarily from lower volume and gross profit margin in civil operations, urban transportation solutions, and industrial operations. These decreases were largely offset by higher volume and gross profit margin in nuclear and utilities operations. In the Concessions segment, gross profit in 2021 increased by $19.1 million primarily from an improvement in results from airport operations at the Bermuda International Airport.
MG&A decreased in 2021 by $0.1 million compared to 2020 primarily due to lower project pursuit and bid costs offset by higher personnel costs. MG&A as a percentage of revenue decreased from 5.0% in 2020 to 4.6% in 2021.
Reported backlog as at December 31, 2021 of $6,198 million compares to backlog of $6,454 million as at December 31, 2020. New contract awards of $3,721 million were booked in 2021 compared to $3,308 million in 2020.
CONSTRUCTION SEGMENT
(1) This is a non-GAAP financial measure. Refer to the “Non-GAAP
And Supplementary Financial Measures” section of this press release for more
information on each non-GAAP financial measure.
(2) This is a non-GAAP ratio. Refer to the “Non-GAAP And
Supplementary Financial Measures” section of this press release for more information on each
non-GAAP ratio.
(3) This is a supplementary financial measure. Refer to the
“Non-GAAP And Supplementary Financial Measures” section of this press release for more information
on each supplementary financial measure.
For the year ended December 31, 2021, revenue in the Construction segment of $3,915 million was $301 million, or 8%, higher than in 2020. Construction segment revenue was higher in nuclear operations ($258 million), driven primarily by increased volume
of refurbishment work at the Darlington and Kincardine nuclear generating stations, both located in Ontario, and in utilities operations ($154 million), due to increased volume of oil and gas distribution and telecommunications work partially
offset by lower high-voltage electrical transmission work. Partially offsetting these increases was lower revenue in industrial operations ($27 million) driven by decreased activity on mainline pipeline work in western Canada partially offset
by higher volume of field construction work at gas, mining, and chemical facilities, and in civil operations and urban transportation solutions ($84 million) driven by lower roadbuilding construction and foundations work partially offset by an
increase in revenue from major projects.
Operating profit in the Construction segment of $143.4 million in 2021 decreased by $49.8 million compared to 2020. Construction segment operating profit in 2020 and 2021 included an operating profit impact related to the CEWS program of $79.7 million
and $31.9 million respectively. After adjusting for the net impact of CEWS amounts reported in 2020 and 2021, year-over-year operating profit decreased by $2.0 million. Lower operating profit was primarily driven by lower volume and gross profit
margin in civil operations, urban transportation solutions, and industrial operations. These decreases were largely offset by higher volume and gross profit margin in nuclear and utilities operations.
Construction backlog as at December 31, 2021 was $6,116 million, which was $266 million lower than the same time last year. Backlog decreased year-over-year in civil operations and urban transportation solutions ($338 million) and utilities operations
($87 million), but increased in nuclear ($155 million) and industrial operations ($4 million). New contract awards in 2021 totaled $3,649 million compared to $3,261 million in 2020. In 2021, a number of Aecon consortiums were awarded multi-year
projects including the replacement of steam generators at Units 3 and 4 of the nuclear generating station in Kincardine, Ontario, construction of the Eglinton Crosstown West Extension Advance Tunnel project in Toronto, Ontario, the North End Sewage
Treatment Plant Upgrade: Headworks Facilities Project in Winnipeg, Manitoba, and a contract to execute the Unit 3 Fuel Channel and Feeder Replacement (FCFR) at the Bruce Nuclear Generating Station in Kincardine, Ontario.
CONCESSIONS SEGMENT
(1) This is a non-GAAP financial
measure. Refer to Section 4 “Non-GAAP and Supplementary Financial Measures” in this MD&A for
more information on each non-GAAP financial measure.
Aecon holds a 100% interest in Bermuda Skyport Corporation Limited (“Skyport”), the concessionaire responsible for the Bermuda airport’s operations, maintenance and commercial functions, and the entity that will manage and coordinate
the overall delivery of the Bermuda International Airport Redevelopment Project over a 30-year concession term that commenced in 2017. On December 9, 2020, Skyport opened the new passenger terminal building at the L.F. Wade International Airport.
Aecon’s participation in Skyport is consolidated and, as such, is accounted for in the consolidated financial statements by reflecting, line by line, the assets, liabilities, revenue and expenses of Skyport. However, Aecon’s concession
participation in the Eglinton Crosstown Light Rail Transit (“LRT”), Finch West LRT, Gordie Howe International Bridge, and Waterloo LRT projects are joint ventures that are accounted for using the equity method.
For the year ended December 31, 2021, revenue in the Concessions segment of $69 million was $29 million lower than in 2020. This lower year-over-year revenue was primarily due to decreased construction activity ($60 million) related to the Bermuda
International Airport Redevelopment Project which was substantially completed in the fourth quarter of 2020. This decrease was partially offset by an increase in airport operations ($28 million). Commercial flight operations in Bermuda continue
to operate at a reduced volume due to COVID-19 compared to pre-pandemic levels but have partially recovered from the more severe impacts experienced in 2020. Included in Concessions’ revenue for 2021 was $3.4 million of construction revenue
that was eliminated on consolidation as inter-segment revenue (compared to $65 million in 2020).
Operating profit in the Concessions segment of $14.0 million for the year ended December 31, 2021 increased by $16.7 million compared to an operating loss of $2.7 million in 2020. The higher operating profit occurred primarily due to the Bermuda International
Airport as a result of the above noted changes in airport construction and operations.
Except for Operations and Maintenance (“O&M”) activities under contract for the next five years and that can be readily quantified, Aecon does not include in its reported backlog expected revenue from concession agreements. As such,
while Aecon expects future revenue from its concession assets, no concession backlog, other than from such O&M activities for the next five years, is reported.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2021, Aecon had a committed revolving credit facility of $600 million, of which $23 million was drawn and $3 million utilized for letters of credit. On June 30, 2021, Aecon completed a two-year extension of its revolving credit
facility which now matures on June 30, 2025. As part of the extension, the Company incorporated a sustainability-linked facility which is tied to the Company’s core environmental, social and governance (ESG) objectives. In the first quarter
of 2021, the performance security guarantee facility provided by Export Development Canada to support letters of credit was increased from $700 million to $900 million. On June 30, 2021, this facility was extended to June 30, 2023. This facility,
when combined with Aecon’s committed revolving credit facility, provides Aecon with committed credit facilities for working capital and letter of credit requirements totaling $1,500 million. The Company has no debt or working capital credit
facility maturities until the second half of 2023, except equipment and property loans and leases in the normal course. As at December 31, 2021, Aecon was in compliance with all debt covenants related to its credit facility. Aecon’s financial
position, liquidity and capital resources are subject to the risks and uncertainties described in Section 10.2 “Contingencies” of Management’s Discussion and Analysis of Operating Results and Financial Condition dated December
31, 2021 regarding certain pending legal proceedings to which Aecon is a party.
CONTINGENCIES
Coastal GasLink Pipeline, Sections 3 and 4
The project has been delayed and impacted by various events for which SA Energy Group (“SAEG”), a partnership in which the Company holds a 50% interest, asserts Coastal GasLink (“CGL”) is contractually responsible, including,
but not limited to, significant scope changes and delays by the client, unforeseen site conditions, recoverable weather impacts and a suspension implemented by the client as a result of regulatory restrictions imposed due to the COVID-19 pandemic.
SAEG asserts that it is entitled to additional compensation for costs associated with those delays and impacts and has commenced an arbitration pursuant to the terms of the contract to resolve the matter. While this commercial dispute could result
in a material impact to Aecon’s earnings, cash flow, and financial position if not resolved favourably, the ultimate results cannot be predicted at this time.
During the second quarter of 2021, CGL issued a Change Directive instructing SAEG to proceed with completing the remaining work on the project without an agreement as to the price for that work. During the fourth quarter, SAEG and CGL reached a number
of informal agreements, that were formalized in the first quarter of 2022, that Aecon believes, based on current assumptions, will enable it to complete the project without a material impact to its cash flow. Following completion of the project,
the arbitration process between SAEG and CGL, as noted above, will determine the final price for the work performed.
DIVIDEND
Aecon’s Board of Directors approved an increase to the quarterly dividend to 18.5 cents per share from 17.5 cents per share previously. The first increased dividend will be paid on April 4, 2022 to shareholders of record on March 25, 2022.
OUTLOOK
Aecon’s overall outlook for 2022 is positive with strong backlog of $6.2 billion at the end of 2021, growing recurring revenue programs, primarily in the utilities sector, and a very strong demand environment for constructions services across
North America. New awards of $3.7 billion in 2021 exceeded 2020 by $0.4 billion, and early 2022 has already seen a number of significant new projects awarded to Aecon demonstrating strong demand for Aecon’s services across Canada in smaller,
medium sized, and larger multi-year projects in the nuclear, civil, urban transportation, and industrial sectors. Recurring revenue is expected to continue to grow driven by demand in the utilities sector, and the Concessions segment is expected
to see airport traffic in Bermuda continue its recovery during 2022 from the impact of the COVID-19 pandemic. The Company expects that demand for its services will remain healthy for the foreseeable future as the federal government and provincial
governments across Canada have identified investment in infrastructure as a key source of stimulus as part of the economic recovery plan. Aecon is pre-qualified on a number of large project bids due to be awarded during 2022 and has a robust pipeline
of opportunities to further add to backlog over time.
While the COVID-19 pandemic is expected to continue to have some impact in moderating overall revenue and profitability growth expectations, including its impact on air traffic related to the Bermuda International Airport, the Company is encouraged
by the generally positive trend in the lifting of social and economic restrictions in Canada, in conjunction with Canada’s high rates of vaccination. Although the operating environment continues to be impacted to some extent, including during
the most recent wave of the highly contagious variant, omicron, overall the impact to Aecon is expected to continue to lessen going forward. Until normal operations fully resume, however, there is no guarantee that all related costs will be recovered
and therefore it is possible that future project margins could be impacted.
In the Construction segment, Aecon continues to be well positioned to successfully bid on, secure and deliver major infrastructure projects for government and the private sector as demonstrated by recent awards. Bidding activity continues to be solid
with a number of the Company’s larger pursuits expected to be awarded in 2022. With strong 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 continued 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, 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 the US, where Aecon is pre-qualified to bid on the I-10 Calcasieu River Bridge P3 Project in Louisiana, and in innovative projects with private sector clients that support a collective focus on sustainability
and the transition to a net-zero economy.
As noted above, the overall outlook for 2022 is positive as construction continues on a number of projects that ramped up in 2020 and 2021, the strong level of backlog and new awards during 2021, and the strong demand environment for Aecon’s
services, including recurring revenue programs, all subject to the unknown impacts of COVID-19 going forward.
CONSOLIDATED RESULTS
The consolidated results for the three months and years ended December 31, 2021 and 2020 are available at the end of this news release.
BALANCE SHEET
CONFERENCE CALL
A conference call and live webcast has been scheduled for 10 a.m. (Eastern Time) on Wednesday, March 2, 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 254589.
An accompanying presentation of the fourth quarter and year-end 2021 financial results will be available after market close on March 1, 2022 at www.aecon.com/investing.
A live webcast of the conference call will also be available at www.aecon.com/InvestorCalendar.
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 March 2, 2022 at 1-866-813-9403 or
1-929-458-6194, or online until midnight on March 16, 2022. The access code is 034771. A replay of the webcast will also be available within 24 hours following the call.
AECON 2022 ANNUAL GENERAL MEETING
Aecon’s Annual General Meeting will be held virtually on Tuesday, June 7, 2022. Additional details will be set out in the Notice of Meeting and Record Date to be filed on SEDAR.
ABOUT AECON
As a Canadian leader in construction and infrastructure development with global expertise, Aecon Group Inc. (TSX: ARE) strives to be the number one 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 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. Join our online community on Twitter, LinkedIn, Facebook and Instagram @AeconGroup.
For further information:
Adam Borgatti
SVP, Corporate Development and Investor Relations
(416)
297-2610
aborgatti@aecon.com
Nicole Court
Vice President, Corporate Affairs
(647) 484-1477
ncourt@aecon.com
NON-GAAP AND SUPPLEMENTARY FINANCIAL MEASURES
This press release presents certain non-GAAP and supplementary financial measures, as well as non-GAAP ratios to assist readers in understanding the Company’s performance (GAAP refers to Canadian Generally Accepted Accounting Principles). These
measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures of performance prepared in accordance
with GAAP.
Management uses these non-GAAP and supplementary financial measures, as well as certain non-GAAP ratios to analyze and evaluate operating performance. Aecon also believes the financial measures defined below are commonly used by the investment community
for valuation purposes, and are useful complementary measures of profitability, and provide metrics useful in the construction industry. The most directly comparable measures calculated in accordance with GAAP are profit (loss) attributable to
shareholders or earnings (loss) per share.
Throughout this press release, the following terms are used, which are not found in the Chartered Professional Accountants of Canada Handbook and do not have a standardized meaning under GAAP.
Non-GAAP Financial Measures
A non-GAAP financial measure: (a) depicts the historical or expected future financial
performance, financial position or cash flow of the Company; (b) with respect to its composition,
excludes an amount that is included in, or includes an amount that is excluded from, the composition of
the most comparable financial measure presented in the primary consolidated financial statements; (c) is
not presented in the primary financial statements of the Company; and (d) is not a ratio.
Non-GAAP financial measures presented and discussed in this press release are as
follows: