SNC-Lavalin Group Inc. (TSX:SNC) today announces its results for the second quarter ended June 30, 2018.
“We are very pleased with our first six months performance, which is in line with our expectations and reached a milestone of over $15 billion of backlog,” said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. “We are entering the third quarter of 2018 with a strong backlog, a number of recently signed master service agreements and a high quality prospects list across our key sectors and geographies; poised for a strong second half of 2018. The integration of Atkins business continues to progress well and we have been able to share technologies, data and knowledge that is improving and broadening our services to clients.”
The Company maintains its 2018 outlook for the adjusted diluted EPS from E&C(2), which is expected to be in the range of $2.60 to $2.85, as well as for the adjusted consolidated diluted EPS(5) in the range of $3.60 to $3.85. As a result of project activity level and awards timing, we expect a stronger adjusted diluted EPS from E&C(2) in the second half of 2018 than in the first half. We also expect that the adjusted diluted EPS E&C(2) in Q4 will be stronger than Q3, which should be similar to Q2.
While we expect continuing market challenges in 2018 in certain of the Company’s sectors, we anticipate benefiting from Atkins synergies and restructuring savings. As such, we expect growth in the Company’s total Segment EBIT(6) in 2018, compared with 2017. Segment EBIT(6) for the EDPM, Mining & Metallurgy, Nuclear and Thermal Power segments are expected to increase, while the Oil & Gas and Infrastructure segments are expected to be mainly in line compared to 2017 with Clean Power to be slightly lower. Note that the 2018 outlook will include twelve months of Atkins’ operations and related financing, compared to approximately six months in 2017. It also assumes a weighted average number of outstanding shares of approximately 175 million. The tax rate for the adjusted E&C business is expected to be between 20% and 25%.
This outlook is based on the assumptions and methodology described in the Company’s 2017 Management’s Discussion and Analysis under the heading, “How We Budget and Forecast Our Results” and the “Forward-Looking Statements” section below and is subject to the risks and uncertainties summarized therein, which are more fully described in the Company’s public disclosure documents.
The Board of Directors today declared a cash dividend of $0.287 per share, payable on August 30, 2018, to shareholders of record on August 16, 2018. This dividend is an “eligible dividend” for income tax purposes.
SNC-Lavalin will hold a conference call today at 3:00 p.m. EDT to review results for its second quarter. To join the conference call, please dial toll free at 1 800 281 7973 in North America, 647 794 1827 in Toronto, 438 968 3557 in Montreal, or 080 0358 6377 in the United Kingdom. A live audio webcast of the conference call and an accompanying slide presentation will be available at investors.snclavalin.com. A recording of the conference call will be available on our website within 24 hours following the call.
The Company reports its financial results in accordance with IFRS. However, the following non-IFRS measures and additional IFRS measures are used by the Company: Adjusted net income from E&C, Adjusted diluted EPS from E&C, Adjusted net income from Capital, Adjusted diluted EPS from Capital, Adjusted consolidated diluted EPS, EBITDA, Adjusted E&C EBITDA, Segment EBIT and 2017 backlog. Additional details for these non-IFRS measures and additional IFRS measures can be found below and in SNC-Lavalin’s MD&A, which is available in the Investors section of the Company’s website at www.snclavalin.com. Non-IFRS financial measures do not have any standardized meaning as prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS measures provide additional insight into the Company’s financial results and certain investors may use this information to evaluate the Company’s performance from period to period. However, these non-IFRS financial measures have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Founded in 1911, SNC-Lavalin is a global fully integrated professional services and project management company and a major player in the ownership of infrastructure. From offices around the world, SNC-Lavalin’s employees are proud to build what matters. Our teams provide comprehensive end-to-end project solutions – including capital investment, consulting, design, engineering, construction, sustaining capital and operations and maintenance – to clients across oil and gas, mining and metallurgy, infrastructure, clean power, nuclear and EDPM (engineering, design and project management). On July 3, 2017, SNC-Lavalin acquired Atkins, one of the world’s most respected design, engineering and project management consultancies, which has been integrated into our sectors. www.snclavalin.com
(1) Adjusted net income from E&C is defined as net income attributable to SNC-Lavalin shareholders from E&C, excluding charges related to restructuring, right-sizing and other, acquisition-related costs and integration costs, impact of U.S. corporate tax reform as well as amortization of intangible assets related to business combinations, net expense for the 2012 class action lawsuits settlement and the gains (losses) on disposals of E&C businesses and the head office building. E&C is defined in the Company’s 2017 financial statements and Management’s Discussion and Analysis. The term “Adjusted net income from E&C” does not have any standardized meaning as prescribed by IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance. See reconciliation below.
(2) Adjusted diluted EPS from E&C is defined as the adjusted net income from E&C divided by the diluted weighted average number of outstanding shares for the period.
(3) Adjusted net income from Capital is defined as net income attributable to SNC-Lavalin shareholders from Capital, excluding the gains on disposals of Capital Investments.
(4) Adjusted diluted EPS from Capital is defined as the adjusted net income from Capital divided by the diluted weighted average number of outstanding shares for the period.
(5) Adjusted consolidated diluted EPS is defined as the adjusted net income from E&C plus the adjusted net income from Capital divided by the diluted weighted average number of outstanding shares for the period.
(6) Segment EBIT consists of revenues less i) direct costs of activities, ii) directly related selling, general and administrative expenses, iii) corporate selling, general and administrative expenses that are allocated to segments; and iv) non-controlling interests before taxes. Expenses that are not allocated to the Company’s segments include: certain corporate selling, general and administrative expenses that are not directly related to projects or segments, impairment loss arising from expected credit losses, gain (loss) arising on financial assets at fair value through profit or loss, restructuring costs, goodwill impairment, acquisition-related costs and integration costs, and amortization of intangible assets related to business combinations, the net class action lawsuits settlement expense, as well as gains (losses) on disposals of E&C businesses, Capital investments and the head office building. The term “Segment EBIT” does not have any standardized meaning as prescribed by IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance.
(7) Adjusted E&C EBITDA is defined herein as earnings from E&C before net financial expenses (income), income taxes, depreciation and amortization, and excludes charges related to restructuring, right-sizing and other, acquisition-related costs and integration costs, net expense for the 2012 class action lawsuits settlement, as well as the gains (losses) on disposals of E&C businesses and head office building. The term “Adjusted E&C EBITDA” does not have any standardized meaning as prescribed by IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance.
(8) In 2018, backlog represents the Remaining Performance Obligations, an IFRS measure, and is defined as a forward-looking indicator of anticipated revenues to be recognized by the Company, determined based on contract awards that are firm and amounting to the transaction price allocated to remaining performance obligations. Management could be required to make estimates regarding the revenue to be generated for long-term firm reimbursable contracts. In 2017, backlog did not have any standardized meaning as prescribed by IFRS and represented a forward-looking indicator of anticipated revenues to be recognized by the Company, determined based on contract awards that are considered firm. Management could be required to make estimates regarding the revenue to be generated for long-term firm reimbursable contracts. In order to provide information that is comparable to the backlog of other categories of activity, the Company limited the O&M activities backlog, which can cover a period of up to 40 years, to the earlier of: i) the contract term awarded; and ii) the next five years.
(9) Net recourse debt to adjusted EBITDA ratio is defined herein as the net recourse debt divided by the trailing 12-months adjusted EBITDA, less interest on limited recourse debt. The term “Net recourse to adjusted EBITDA ratio” does not have any standardized meaning as prescribed by IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance.
(in thousands of Canadian dollars, unless otherwise indicated) | Second Quarter | Six months ended June 30 | ||
2018 | 2017 | 2018 | 2017 | |
Revenues | ||||
From E&C | 2,469,920 | 1,868,161 | 4,837,117 | 3,656,485 |
From Capital | 57,199 | 66,712 | 121,396 | 127,658 |
2,527,119 | 1,934,873 | 4,958,513 | 3,784,143 | |
Net income (loss) attributable to SNC-Lavalin’s shareholders From E&C |
(16,809) | 87,356 | 14,732 | 132,693 |
From Capital | 99,820 | 49,034 | 146,351 | 93,410 |
83,011 | 136,390 | 161,083 | 226,103 | |
Diluted EPS ($) From E&C From Capital |
(0.10) 0.57 |
0.58 0.33 |
0.08 0.83 |
0.88 0.62 |
0.47 | 0.91 | 0.92 | 1.50 | |
Adjusted net income attributable to SNC-Lavalin’s shareholders From E&C(1) From Capital(3) |
113,537 41,415 |
64,160 43,632 |
203,014 87,946 |
124,884 88,007 |
154,952 | 107,792 | 290,960 | 212,891 | |
Adjusted diluted EPS ($) From E&C(2) From Capital(4) |
0.65 0.23 |
0.43 0.29 |
1.16 0.50 |
0.83 0.59 |
0.88 | 0.72 | 1.66 | 1.42 | |
Adjusted E&C EBITDA(7) Adjusted E&C EBITDA margin |
189,724 7.7% |
86,849 4.6% |
367,040 7.6% |
186,840 5.1% |
Backlog(8) | 15,174,800 | 9,576,600 | ||
Cash and cash equivalents | 721,408 | 737,361 | ||
Recourse debt | 2,177,921 | 349,487 |
Note that certain totals and subtotals may not reconcile due to rounding
Net income (loss), as reported (IFRS) | Net charges related to restructuring & right-sizing plan and other | Acquisition | Net loss (gain) on disposals of E&C business and Capital investment | Net expense for the 2012 class action lawsuits settlement | Impact of U.S. corporate tax reform | Net income, adjusted (Non-IFRS) | ||
Acquisition-related costs and integration costs | Amortization of intangible assets related to business combinations | |||||||
Second Quarter 2018 In M$ |
||||||||
E&C | (16.8) | 6.7* | 10.3 | 43.7 | 0.2 | 64.5 | 4.8 | 113.5 |
Capital | 99.8 | – | – | – | (58.4) | – | – | 41.4 |
83.0 | 6.7 | 10.3 | 43.7 | (58.1) | 64.5 | 4.8 | 154.9 | |
Per Diluted share ($) | ||||||||
E&C | (0.10) | 0.04 | 0.06 | 0.25 | 0.00 | 0.37 | 0.03 | 0.65 |
Capital | 0.57 | – | – | – | (0.33) | – | – | 0.24 |
0.47 | 0.04 | 0.06 | 0.25 | (0.33) | 0.37 | 0.03 | 0.89 | |
Six Months Ended June 30, 2018 In M$ |
||||||||
E&C | 14.7 | 8.0 | 18.7 | 90.6 | 0.3 | 64.5 | 6.2 | 203.0 |
Capital | 146.4 | – | – | – | (58.4) | – | – | 87.9 |
161.1 | 8.0 | 18.7 | 90.6 | (58.1) | 64.5 | 6.2 | 290.9 | |
Per Diluted share ($) | ||||||||
E&C | 0.08 | 0.05 | 0.11 | 0.52 | 0.00 | 0.37 | 0.04 | 1.16 |
Capital | 0.83 | – | – | – | (0.33) | – | – | 0.50 |
0.92 | 0.05 | 0.11 | 0.52 | (0.33) | 0.37 | 0.04 | 1.66 |
Note that certain totals and subtotals may not reconcile due to rounding
*This amount included $6.9 million ($5.6 million after taxes) of net charges which did not meet the restructuring costs definition in accordance with IFRS.
Net income, as reported (IFRS) | Net charges related to the restructuring & right-sizing plan and other | Acquisition | Net gain on disposals of E&C business, head office building, and Capital investment | Net income, adjusted (Non-IFRS) | ||
Acquisition-related costs and integration costs | Amortization of intangible assets related to Kentz | |||||
Second Quarter 2017 In M$ |
||||||
E&C | 87.4 | 22.6* | 44.5 | 11.5 | (101.8) | 64.2 |
Capital | 49.0 | – | – | – | (5.4) | 43.6 |
136.4 | 22.6 | 44.5 | 11.5 | (107.2) | 107.8 | |
Per Diluted share ($) | ||||||
E&C | 0.58 | 0.15 | 0.30 | 0.08 | (0.68) | 0.43 |
Capital | 0.33 | – | – | – | (0.04) | 0.29 |
0.91 | 0.15 | 0.30 | 0.08 | (0.72) | 0.72 | |
Six Months Ended June 30, 2017 In M$ |
||||||
E&C | 132.7 | 25.2 | 45.6 | 23.8 | (102.4) | 124.9 |
Capital | 93.4 | – | – | – | (5.4) | 88.0 |
226.1 | 25.2 | 45.6 | 23.8 | (107.8) | 212.9 | |
Per Diluted share ($) | ||||||
E&C | 0.88 | 0.17 | 0.31 | 0.16 | (0.68) | 0.83 |
Capital | 0.62 | – | – | – | (0.04) | 0.59 |
1.50 | 0.17 | 0.31 | 0.16 | (0.72) | 1.42 |
Note that certain totals and subtotals may not reconcile due to rounding
*This amount included $4.0 million ($5.0 million after taxes) of net charges which did not meet the restructuring costs definition in accordance with IFRS.
SNC-Lavalin’s Consolidated Financial Statements and Management’s Discussion and Analysis and other relevant financial materials are available in the Investors section of the Company’s website at www.snclavalin.com. These and other Company reports are also available on the website maintained by the Canadian Securities regulators at www.sedar.com.
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