Aecon reports year-end 2023 results

Press Release

Toronto, Ontario – March 5, 2024: Aecon Group Inc. (TSX: ARE) (“Aecon” or the “Company”) today reported results for the fourth quarter and year-end 2023 including full year revenue of $4.6 billion and backlog of $6.2 billion at December 31, 2023. Aecon’s Board of Directors approved an increase to the quarterly dividend to 19 cents per share from 18.5 cents per share previously.

“2023 was a transformational year for Aecon – with our teams focused on safety and execution across all of our projects and driven by three significant transactions which allowed Aecon to capture unlocked value, partner with respected institutions with significant experience to help Aecon grow, and strengthen Aecon’s balance sheet and capital position,” said Jean-Louis Servranckx, President and Chief Executive Officer, Aecon Group Inc. “Demand for Aecon’s services across Canada continues to be strong, and we are strategically focused on embracing new opportunities to grow in the decarbonization and energy transition space, as well as U.S. and international markets.”

HIGHLIGHTS

All quarterly financial information contained in this news release is unaudited.

• Revenue for the year ended December 31, 2023 of $4,644 million was $52 million, or 1%, lower compared to 2022. The lower revenue is largely attributable to the sale of the Aecon Transportation East (“ATE”) business in the second quarter of 2023 which generated $51 million revenue in 2023 compared with $326 million revenue in 2022.
• Operating profit of $240.9 million (operating margin⁽⁴⁾ of 5.2%) compared to operating profit of $97.2 million in 2022 (operating margin of 2.1%). The improvement in year-over-year operating profit was largely due to an increase in other income of $209.4 million. This increase was primarily due to gains related to the sale of a 49.9% interest in Skyport, the Bermuda International Airport concessionaire, of $139.0 million, including a fair value remeasurement gain of $80.4 million on Aecon’s 50.1% retained interest in the concessionaire and the sale of ATE ($36.5 million), and higher gains on the sale of property, buildings, and equipment ($38.7 million).
• Adjusted EBITDA⁽¹⁾⁽²⁾ of $143.4 million for the year ended December 31, 2023 (Adjusted EBITDA margin⁽³⁾ of 3.1%) compared to Adjusted EBITDA of $219.2 million (Adjusted EBITDA margin of 4.7%) in 2022.
• Net profit of $161.9 million (diluted earnings per share of $2.10) for the year ended December 31, 2023 compared to net profit of $30.4 million (diluted earnings per share of $0.47) in 2022.
• Four large fixed price legacy projects being performed by joint ventures in which Aecon is a participant (see Section 5 “Recent Developments”, Section 10.2 “Contingencies” and Section 13 “Risk Factors” of the Company’s December 31, 2023 Management’s Discussion and Analysis (“MD&A”) which is available on the Company’s profile on SEDAR+ (www.sedarplus.com) are being negatively impacted due to additional costs for which the joint ventures assert that the owners are contractually responsible, including for, among other things, unforeseeable site conditions, third party delays, COVID-19, supply chain disruptions, and inflation related to labour and materials. In 2023, due to the factors discussed above that impacted these four fixed price legacy projects during the year, Aecon recognized an operating loss of $215.2 million arising from three of the four projects compared to an operating loss of $120.0 million in 2022. At December 31, 2023 the remaining backlog to be worked off on these projects was $420 million compared to $1,079 million at December 31, 2022.
• Reported backlog at December 31, 2023 of $6,157 million compared to backlog of $6,296 million at December 31, 2022. New contract awards of $4,505 million were booked in 2023 compared to $4,795 million in 2022.
• Aecon was awarded a $290 million design-build contract by the Ontario government for the Eglinton Crosstown West Extension project’s Elevated Guideway in Ontario. The value of the contract was added to Aecon’s Construction segment backlog in the fourth quarter of 2023.
• Aecon was awarded a US$200 million contract by Dominion Energy for the replacement of Condensers and Feedwater Heaters at the North Anna Power Station in Mineral, Virginia. The value of the contract was added to Aecon’s Construction segment backlog in the fourth quarter of 2023.
• Aecon announced the full cash repayment of the $184 million principal amount owed under its 5.0% unsecured convertible debentures along with accrued unpaid interest on December 29, 2023.
• Subsequent to year-end, Contrecoeur Terminal Constructors General Partnership, a consortium in which Aecon holds a 40% interest, executed a contract with the Montréal Port Authority for the Contrecœur Terminal Expansion project in-water works under a Progressive Design-Build approach in Québec.
• Subsequent to year-end, Wicehtowak Aecon Industrial LP, a joint venture in which Aecon holds a 49% interest, was awarded a $222 million contract by BHP Canada for the Jansen Stage 1 Wet Mill Area – Structural, Mechanical, Piping, Electrical and Instrumentation project in Saskatchewan.

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