Canada NewsWire
CALGARY, Aug. 9, 2016
Backlog of $2.1 Billion; Wildfires Impact Q2 Results
CALGARY, Aug. 9, 2016 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the second quarter and first six months of 2016, and declared a quarterly dividend of $0.12 per common share.
Results for the second quarter reflect the impact of wildfires in Northern Alberta which disrupted Industrial Group activity during the period. The Industrial Group provides maintenance, repair and operations ("MRO") services to a number of oil sands producers in the Northern Alberta region, and during the crisis moved quickly to shut down affected operations and demobilize hundreds of employees.
"Our first priority is the safety of our employees, their families and the communities in which we operate," said David LeMay, President and CEO. "I am very proud of our team's response in ensuring all of our employees were safely evacuated during the crisis. We have since joined with others in the region to provide ongoing support to the residents of Northern Alberta, and we worked closely with our customers to get operations back up and running as quickly and as smoothly as possible."
Despite the impacts of the wildfires and the added challenges of weak economic conditions in Alberta, Stuart Olson generated a stable contract income margin in the first half of the year and sustained a robust backlog in the second quarter. Buildings Group performance also continued to improve, contributing to adjusted EBITDA margins that are now nearing the target level of 4% to 5% for this group.
Stuart Olson also took decisive steps to enhance efficiency across the Company, implementing a number of restructuring initiatives that, combined with first quarter initiatives, are expected to provide permanent expense reductions going forward. The Company plans to continue to aggressively match its cost structure to the activity of the business over the second half of 2016 and expects those initiatives to further reduce expenses in future periods.
"While the current market challenges in Alberta are significant, Stuart Olson's business model is providing stability, our execution and efficiency are steadily improving, and our balance sheet remains strong and flexible. Going forward, our dividend is well supported and the pipeline of future project opportunities looks promising, particularly with a view to future federal and provincial infrastructure projects," said Mr. LeMay.
FINANCIAL HIGHLIGHTS
Three months ended |
Six months ended | ||||
June 30 |
June 30 | ||||
$millions, except percentages and per share amounts |
2016 |
2015 |
2016 |
2015 | |
Contract revenue |
227.2 |
303.7 |
470.2 |
586.6 | |
Contract income |
21.6 |
31.7 |
45.0 |
56.6 | |
Contract income margin |
9.5% |
10.4% |
9.6% |
9.6% | |
Adjusted EBITDA |
7.2 |
12.9 |
13.5 |
23.4 | |
Adjusted EBITDA margin |
3.2% |
4.2% |
2.9% |
4.0% | |
Net (loss) earnings |
(3.4) |
1.7 |
(4.3) |
2.7 | |
(Loss) earnings per share |
|||||
Basic (loss) earnings per share |
(0.13) |
0.06 |
(0.16) |
0.10 | |
Diluted (loss) earnings per share |
(0.13) |
0.06 |
(0.16) |
0.10 | |
Dividends declared per share |
0.12 |
0.12 |
0.24 |
0.24 | |
Adjusted free cash flow |
(5.3) |
10.8 |
(7.9) |
10.3 | |
Adjusted free cash flow per share |
(0.20) |
0.41 |
(0.30) |
0.39 | |
$millions |
Jun. 30, |
Dec. 31, | |||
Backlog |
2,096.1 |
1,960.9 | |||
Working capital |
58.3 |
64.4 | |||
Long-term debt (excluding current portion) |
50.4 |
46.6 | |||
Convertible debentures (excluding equity portion)(2) |
73.4 |
72.5 | |||
Total assets |
631.0 |
646.8 |
These financial results are presented in conformance with International Financial Reporting Standards ("IFRS"). All figures are in Canadian dollars unless otherwise noted. Certain financial and operational measures referred to in this press release, including "contract income margin", "adjusted EBITDA", "adjusted EBITDA margin", "backlog", "working capital", "adjusted free cash flow" and "adjusted free cash flow per share", are not prescribed measures under IFRS. For a description of these measures, see the "Non-IFRS Measures" section in Stuart Olson's June 30, 2016 Management's Discussion & Analysis.
Second Quarter (Q2) 2016 Overview
OUTLOOK
The Company anticipates that 2016 consolidated revenue will be lower than the level achieved in 2015. This revenue outlook reflects the negative impact of the Northern Alberta wildfires on Industrial Group activity in the oil sands, as well as the continuation of challenging market conditions in Alberta related to the "lower-for-longer" oil price environment. These impacts are tempered by Stuart Olson's strong $2.1 billion backlog which provides line of sight to activity levels for 2016 and into 2017, and reflects the Company's access to many different segments and geographic markets within the Canadian construction market. Both the Buildings Group and the Commercial Systems Group are executing backlogs dominated by public projects across multiple provinces. The Industrial Group also continues to successfully pursue new business opportunities both within and outside of Alberta.
Adjusted EBITDA and adjusted EBITDA margin are expected to decline in 2016, reflecting the direct and indirect impact of the wildfires on the Industrial Group's business, the continuation of challenging economic conditions in the Alberta market, and an increased proportion of lower-risk and correspondingly lower-margin MRO projects within the Industrial Group. Adjusted EBITDA results in the second half of 2016 are also expected to include the reversal of intercompany eliminations that favourably impacted 2015 results.
Stuart Olson's outlook for its three business groups is as follows:
Stuart Olson will hold a conference call and webcast to discuss second quarter 2016 results on Wednesday, August 10, 2016 at 7:30 a.m. Mountain Time (9:30 a.m. Eastern). The webcast will be broadcast live and will also be available for replay in the Presentations & Events subsection under Investor Relations on the Company's website at www.stuartolson.com. For those unable to listen during the live webcast, a replay will be available on the website shortly after the conclusion of the conference call for a period of 90 days. Financial analysts and institutional investors who wish to ask questions during the conference call are invited to call 1-888-390-0546 (Canada and USA) or 1-587-880-2171 (outside Canada and USA). For those unable to participate on the live call, a replay will be made available until Wednesday, August 24, 2016, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 012608. The public is invited to listen to the live conference call, webcast or the replay.
About Stuart Olson Inc.
Stuart Olson Inc. provides general contracting and electrical building systems contracting in the public and private construction markets as well as electrical, mechanical and specialty trades, such as insulation, cladding and asbestos abatement, in the industrial construction and services market. The Company operates office locations throughout British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stuart Olson's common shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols "SOX" and "SOX.DB.A", respectively. www.stuartolson.com
Forward-Looking Information
This press release contains certain statements that may constitute forward-looking information within the meaning of applicable securities laws. Forward-looking information is based on management's reasonable assumptions, analysis and estimates in respect of its experience and perception of trends, current economic conditions, government policies and expected developments, as well as other material factors that it considers to be relevant at the time of making such statements. Forward-looking information includes financial outlook or future-oriented financial information. Any financial outlook or future-oriented financial information in the press release has been approved by management of Stuart Olson. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Often, but not always, forward-looking information can be identified by the use of such words as "may", "will", "expect", "believe", "plan", "intend", "estimate", "outlook", "forecast", "should", "anticipate" and other similar terminology, including statements concerning possible or assumed future results. Forward-looking information contained in this press release includes, without limitation, the statements relating to:
(a) |
Plans to undertake further restructuring initiatives in the last half of 2016, and the expectation that these initiatives will reduce our cost structure moving forward; and | |
(b) |
2016 revenue visibility and expectations that overall 2016 consolidated revenue will be lower than that obtained in 2015; | |
(c) |
Stuart Olson's backlog and the implication that such backlog provides line of sight to activity levels in 2016 and 2017; | |
(d) |
2016 EBITDA and EBITDA margin projections; | |
(e) |
economic conditions; and | |
(f) |
the outlook for each of Stuart Olson's business groups, specifically: | |
(i) |
decreased 2016 revenue and significantly lower 2016 adjusted EBITDA and adjusted EBITDA margin in 2016 compared to 2015 for the Industrial Group; | |
(ii) |
higher adjusted EBITDA and adjusted EBITDA margin in 2016 on lower 2016 revenues for the Buildings Group; and | |
(iii) |
lower 2016 revenue, adjusted EBITDA and adjusted EBITDA margin compared to 2015 for the Commercial Systems Group. |
With respect to forward-looking information listed above and contained in this press release, we have made assumptions regarding, among other things:
The forward-looking information in this press release is included solely for the purpose of assisting investors in understanding the Company's financial position and the results of its operations as at the date hereof. By its nature, forward-looking information involves known and unknown risks and uncertainties, which give rise to the possibility that management's assumptions, analysis and estimates will be incorrect and that the Company's anticipated results will not be achieved. Although the Company believes that the statements with respect to forward-looking information are reasonable and current, such statements should not be interpreted as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. Forward-looking information is necessarily subject to a number of factors that may cause actual results to differ materially from those results implied by the expectations suggested by such information. Those factors include, without limitation, the risks and uncertainties described in the Company's Annual Information Form filed with the securities regulatory authorities in Canada under the Company's profile at www.sedar.com. Readers are encouraged to consider the foregoing risks and other factors carefully when evaluating the forward-looking information and are cautioned not to place undue reliance upon such information when making investment decisions.
The forward-looking information in this press release is current to the date hereof, and is subject to change following such date. While the Company may elect to do so, unless required by applicable law, it undertakes no obligation to update this information to reflect new information or circumstances at any particular time.
SOURCE Stuart Olson Inc.