- $94.6 million of net income
attributable to SNC-Lavalin's shareholders for the first three
months of the year, including a successful reversal of a previously
recorded risk provision;
- 9.8% decrease in Selling, General and Administrative
expenses, compared to the first quarter of 2013;
- 9.8% EBIT(1) margin on revenues;
- $8.4 billion revenue backlog,
in line with the end of 2013;
- Challenging legacy projects represent $728.8 million of backlog, a 19% sequential
decrease;
- $1.1 billion of cash and cash
equivalents, in line with the end of 2013;
- New reporting segments to reflect the Company's internal
reorganization;
- Agreement to sell SNC-Lavalin's equity stake in AltaLink
signed on May 1, 2014; and
- As a result of the AltaLink transaction, 2014 EPS guidance
range increased to $2.80 to $3.05
from $2.25 to $2.50.
MONTREAL, May 8, 2014 /CNW Telbec/ - SNC-Lavalin Group Inc.
(TSX: SNC) announces its results today for the first quarter ended
March 31, 2014.
|
|
(in thousands of
Canadian dollars, unless otherwise indicated) |
First
Quarter
ended March 31, |
|
2014 |
2013 |
|
|
|
Revenues by activity |
|
|
|
Services |
503,605 |
650,671 |
|
Packages |
610,156 |
723,422 |
|
O&M |
375,180 |
382,875 |
|
ICI |
231,208 |
143,288 |
|
1,720,149 |
1,900,256 |
|
|
|
Net income attributable to SNC-Lavalin's
shareholders |
|
|
From E&C |
30,803 |
18,585 |
From ICI |
63,787 |
35,038 |
Net income attributable to
SNC-Lavalin's shareholders |
94,590 |
53,623 |
|
|
|
Net income
attributable to non-controlling interests |
102 |
77 |
Net income |
94,692 |
53,700 |
|
|
|
Diluted earnings per share
($) |
0.62 |
0.35 |
|
|
|
|
As at
March
31, 2014 |
As at
December
31, 2013 |
Revenue backlog by
activity |
|
|
|
Services |
1,604,300 |
1,629,600 |
|
Packages |
4,780,900 |
4,429,700 |
|
O&M |
1,988,900 |
2,228,500 |
|
8,374,100 |
8,287,800 |
|
|
|
Cash and cash equivalents |
1,060,041 |
1,108,694 |
"In the first quarter, we continued to
strengthen our leadership team, execute on our Value Up profit
improvement program, and optimize our geographic and services mix
to advance the positioning of SNC-Lavalin to win business, improve
earnings and deliver growth. As part of our Strategic Plan, we are
also rebalancing our Infrastructure Concession Investments
portfolio and evaluating the life cycle of these assets to build
value for our Company. Our expertise and experience in asset
management, coupled with our domain expertise and project
capability, have resulted in outsized returns on many assets, and
the recent agreement to sell AltaLink is a prime example of
this," said Robert G. Card,
President and Chief Executive Officer, SNC-Lavalin Group Inc.
First Quarter Results
For the first quarter of 2014, SNC-Lavalin reported net income
attributable to SNC-Lavalin shareholders of $94.6 million ($0.62 per share on a diluted basis), compared to
a net income of $53.6 million
($0.35 per share on a diluted basis)
for the same period of 2013.
Net income from Engineering & Construction
and Operations & Maintenance ("E&C") increased to
$30.8 million, compared to net income
of $18.6 million for the first
quarter ended March 31, 2013.
In the first quarter of 2014, the Company
revised its reportable segments under E&C to reflect the
changes made to its internal reporting structure. SNC-Lavalin's
reportable segments for E&C are now: i) Resources, Environment
& Water ("REW"); ii) Power; and iii) Infrastructure. The
Company also provides additional information on certain
sub-segments of its reportable segments, notably the Mining &
Metallurgy, Oil & Gas and Environment & Water sub-segments
of REW, as well as the Infrastructure & Construction and
Operation & Maintenance ("O&M") sub-segments of
Infrastructure. Furthermore, the Company changed its methodology
for measuring profit or loss for its reportable segments. As of
January 2014, the Company evaluates
its segment performance using Earnings Before Interest and Taxes
("EBIT")(1) instead of Operating Income.
The increase of $12.2
million in net income from E&C in the first quarter of
2014, compared to the first quarter of 2013, was mainly due to a
higher contribution from the Infrastructure segment, partially
offset by a lower contribution from the Power and REW segments.
The higher contribution from the Infrastructure
segment was mainly due to a reversal of a risk provision previously
recorded on a Libyan project within the Infrastructure &
Construction sub-segment. The Company continues to effectively
manage risk associated with the Infrastructure segment's
challenging legacy projects, while operating in a demanding
end-market environment. The lower contribution from the Power
segment was mainly due to timing, and the Company expects the lower
volume of Packages activity to rebound as it progresses on the
recently announced John Hart Generating Station Replacement
Facility project. The lower contribution from the REW segment was
mainly due to negative EBIT in Oil & Gas and Environment &
Water. The negative EBIT in Oil & Gas mainly reflected a lower
volume of activity combined with a lower gross margin-to-revenue
ratio, both negatively impacted in 2014 by a challenging legacy
fixed-priced project in Algeria,
which is nearly completed. The negative EBIT for Environment &
Water mainly reflected a decrease in gross margin.
Net income from Infrastructure Concession
Investments ("ICI") increased to $63.8 million, compared to $35.0 million for the first quarter ended
March 31, 2013, mainly due to a
higher dividend received from Highway 407 and higher net income
from AltaLink.
Revenues for the first quarter of 2014 were
$1.7 billion, compared to
$1.9 billion in the first quarter of
2013, as the increase in ICI revenues was more than offset by a
decrease in E&C revenues. "Despite decreased revenues, we have
a steady backlog, recent project wins and a solid prospect list,
and we are on track to meet our guidance and remain positive about
the year ahead. Also, as part of the AltaLink transaction and
effective upon closing, we are pleased to have entered into a
strategic partnership with MidAmerican Transmission to develop
engineering, procurement and construction opportunities in the US
market with independent system operators and regional transmission
organizations," added Mr. Card.
Selling, general and administrative ("SG&A")
expenses for the first quarter ended March
31, 2014, decreased by 9.8% to $186.8
million, compared to $207.1
million for the corresponding period of 2013. The decrease
is mainly attributable to costs savings resulting from
restructuring plans implemented in the second half of 2013, as well
as other initiatives under the Value Up program.
Cash and cash equivalents totalled $1.1 billion as at March
31, 2014, in line with the end of December 31, 2013.
Revenue backlog totalled $8.4 billion at the end of March 2014, in line with the end of December 2013, as the increase in the Packages
revenue backlog was offset by a decrease in O&M. Packages
backlog increased by $351.2 million
since December 31, 2013, despite a
decrease of $173.8 million related to
challenging legacy projects in the Company's backlog. Challenging
legacy projects included in the Company's backlog, the large
majority of which are in the hospitals sector, totalled
$728.8 million as at March 31, 2014, a 19% decrease from $902.6 million as at December 31, 2013.
2014 Outlook Update
The Company is revising its previously announced 2014 guidance, and
it now expects 2014 Earnings Per Share ("EPS") to be in the range
of $2.80 to $3.05, versus its
previous guidance of $2.25 to $2.50.
The revision results from an accounting requirement under IFRS,
following the Company's recently announced agreement to sell its
equity stake in AltaLink, under which the Company will cease to
depreciate and amortize non-current assets of AltaLink on a
prospective basis. This outlook does not take into account the
eventual gain on the sale of the Company's interest in AltaLink.
The revised outlook continues to be principally based on the
expectations that challenges will continue in the Infrastructure
& Construction and Oil & Gas sub-segments, mainly due to
certain challenging legacy projects, and in the Mining &
Metallurgy sub-segment, which continues to be affected by the
softening of the commodity markets, as well as the expectation that
the Power and ICI segments, and the O&M sub-segment, should
increase their contributions. This outlook assumes that SG&A
expenses will continue to decrease mainly as a result of new
initiatives and ongoing activities associated with SNC-Lavalin's
new company-wide profit improvement program.
The above revised outlook continues to be based
on the assumptions and methodology described in the Company's 2013
Management's Discussion and Analysis under the heading "How We
Budget and Forecast Our Results", which should be read in
conjunction with 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.
Quarterly Dividend
The Board of Directors today declared a cash dividend of
$0.24 per share, payable on
June 5, 2014, to shareholders of
record on May 22, 2014. This dividend
is an "eligible dividend" for income tax purposes.
About SNC-Lavalin
SNC-Lavalin is one of the leading engineering and construction
groups in the world, and is a major player in the ownership of
infrastructure and in the provision of operations and maintenance
services. Founded in 1911, SNC-Lavalin has offices across
Canada and in over 40 other
countries around the world, and is currently active in some 100
countries. www.snclavalin.com
Forward-looking Statements:
Reference in this press release, and
hereafter, to the "Company" or to "SNC-Lavalin" means, as the
context may require, SNC-Lavalin Group Inc. and all or some of its
subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or
one or more of its subsidiaries or joint arrangements.
Statements made in this press release that
describe the Company's or management's budgets, estimates,
expectations, forecasts, objectives, predictions, projections of
the future or strategies may be "forward-looking statements", which
can be identified by the use of the conditional or forward-looking
terminology such as "aims", "anticipates", "assumes", "believes",
"estimates", "expects", "goal", "intends", "may", "plans",
"projects", "should", "will", or the negative thereof or other
variations thereon. Forward-looking statements also include any
other statements that do not refer to historical facts. All such
forward-looking statements are made pursuant to the "safe-harbour"
provisions of applicable Canadian securities laws. The Company
cautions that, by their nature, forward-looking statements involve
risks and uncertainties, and that its actual actions and/or results
could differ materially from those expressed or implied in such
forward-looking statements, or could affect the extent to which a
particular projection materializes. Forward-looking statements are
presented for the purpose of assisting investors and others in
understanding certain key elements of the Company's current
objectives, strategic priorities, expectations and plans, and in
obtaining a better understanding of the Company's business and
anticipated operating environment. Readers are cautioned that such
information may not be appropriate for other purposes.
The 2014 outlook referred to in this press
release is forward-looking information and is based on the
methodology described in the Company's 2013 Management's Discussion
and Analysis under the heading "How We Budget and Forecast Our
Results" and is subject to the risks and uncertainties described in
the Company's public disclosure documents. The purpose of the 2014
outlook is to provide the reader with an indication of management's
expectations, at the date of this press release, regarding the
Company's future financial performance and readers are cautioned
that this information may not be appropriate for other
purposes.
Forward-looking statements made in this press
release are based on a number of assumptions believed by the
Company to be reasonable as at the date hereof. The assumptions are
set out throughout the Company's 2013 Management's Discussion and
Analysis (particularly, in the sections entitled "Critical
Accounting Judgments and Key Sources of Estimation Uncertainty" and
"How We Analyze and Report our Results" in the Company's 2013
Management's Discussion and Analysis), as updated in the Company's
First Quarter 2014 Management's Discussion and Analysis. The 2014
outlook also assumes that previously disclosed amounts relating to
a claim in Algeria will not be
reversed and does not take into account the eventual gain on the
sale of the Company's interest in AltaLink. If these assumptions
are inaccurate, the Company's actual results could differ
materially from those expressed or implied in such forward-looking
statements. In addition, important risk factors could cause the
Company's assumptions and estimates to be inaccurate and actual
results or events to differ materially from those expressed in or
implied by these forward-looking statements. These risks include,
but are not limited to: (a) the outcome of pending and future
claims and litigation could have a material adverse impact on the
Company's business, financial condition and results of operation;
(b) the Company is subject to ongoing investigations which could
subject the Company to criminal and administrative enforcement
actions, civil actions and sanctions, fines and other penalties,
some of which may be significant, which, in turn, could harm the
Company's reputation, result in suspension, prohibition or
debarment of the Company from participating in certain projects,
reduce its revenues and net income and adversely affect its
business; (c) further regulatory developments could have a
significant adverse impact on the Company's results, and employee,
agent or partner misconduct or failure to comply with anti-bribery
and other government laws and regulations could harm the Company's
reputation, reduce its revenues and net income, and subject the
Company to criminal and administrative enforcement actions and
civil actions;(d) if the Company is not able to successfully
execute on its new strategic plan, its business and results of
operations would be adversely affected; (e) a negative impact on
the Company's public image could influence its ability to obtain
future projects; (f) fixed-price contracts or the Company's failure
to meet contractual schedule or performance requirements may
increase the volatility and unpredictability of its revenue and
profitability; (g) the Company's revenue and profitability are
largely dependent on the awarding of new contracts, which it does
not directly control, and the uncertainty of contract award timing
could have an adverse effect on the Company's ability to match its
workforce size with its contract needs; (h) the Company's backlog
is subject to unexpected adjustments and cancellations, including
under "termination for convenience" provisions, and does not
represent a guarantee of the Company's future revenues or
profitability; (i) SNC-Lavalin is a provider of services to
government agencies and is exposed to risks associated with
government contracting; (j) the Company's international operations
are exposed to various risks and uncertainties, including
unfavourable political environments, weak foreign economies and the
exposure to foreign currency risk; (k) there are risks associated
with the Company's ownership interests in ICI that could adversely
affect it; (l) the Company is dependent on third parties to
complete many of its contracts; (m) the Company's use of joint
ventures and partnerships exposes it to risks and uncertainties,
many of which are outside of the Company's control; (n) the
competitive nature of the markets in which the Company does
business could adversely affect it; (o) the Company's project
execution activities may result in professional liability or
liability for faulty services; (p) the Company could be subject to
monetary damages and penalties in connection with professional and
engineering reports and opinions that it provides; (q) the Company
may not have in place sufficient insurance coverage to satisfy its
needs; (r) the Company's employees work on projects that are
inherently dangerous and a failure to maintain a safe work site
could result in significant losses and/or an inability to obtain
future projects; (s) the Company's failure to attract and retain
qualified personnel could have an adverse effect on its activities;
(t) work stoppages, union negotiations and other labour matters
could adversely affect the Company; (u) the Company relies on
information systems and data in its operations. Failure in the
availability or security of the Company's information systems or in
data security could adversely affect its business and results of
operations; (v) any acquisition or other investment may present
risks or uncertainties; (w) a deterioration or weakening of the
Company's financial position, including its cash net of recourse
debt, would have a material adverse effect on its business and
results of operations; ( x ) the Company may have significant
working capital requirements, which if unfunded could negatively
impact its business, financial condition and cash flows; (y) an
inability of SNC-Lavalin's clients to fulfill their obligations on
a timely basis could adversely affect the Company; (z) the Company
may be required to impair certain of its goodwill, and it may also
be required to write down or write off the value of certain of its
assets and investments, either of which could have a material
adverse impact on the Company's results of operations and financial
condition; (aa) global economic conditions could affect the
Company's client base, partners, subcontractors and suppliers and
could materially affect its backlog, revenues, net income and
ability to secure and maintain financing; (bb) fluctuations in
commodity prices may affect clients' investment decisions and
therefore subject the Company to risks of cancellation, delays in
existing work, or changes in the timing and funding of new awards,
and may affect the costs of the Company's projects; (cc) inherent
limitations to the Company's control framework could result in a
material misstatement of financial information, and; (dd)
environmental laws and regulations expose the Company to certain
risks, could increase costs and liabilities and impact demand for
the Company's services. The Company cautions that the foregoing
list of factors is not exhaustive. For more information on risks
and uncertainties, and assumptions that would cause the Company's
actual results to differ from current expectations, please refer to
the sections "Risks and Uncertainties", "How We Analyze and Report
Our Results" and "Critical Accounting Judgments and Key Sources of
Estimation Uncertainty" in the Company's 2013 Management's
Discussion and Analysis, as updated in the Company's First Quarter
2014 Management's Discussion and Analysis.
The forward-looking statements herein reflect
the Company's expectations as at the date of this press release and
are subject to change after this date. The Company does not
undertake any obligation to update publicly or to revise any such
forward-looking statements whether as a result of new information,
future events or otherwise, unless required by applicable
legislation or regulation.
(1) EBIT is defined herein as income
before net financial expenses and income taxes. Segment and
sub-segment EBIT is defined herein as income net of non-controlling
interest, before restructuring costs, net financial expenses and
income taxes. The term EBIT does not have any standardized meaning
under IFRS. Therefore, it may not be comparable to similar measures
presented by other issuers. EBIT is a non-IFRS financial measure
which is an indicator of the entity's capacity to generate income
from operations before taking into account management's financing
decisions. 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.
SNC-Lavalin's Consolidated Financial Statements
and Management's Discussion and Analysis and other relevant
financial materials are available in the Investor Relations 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.
SOURCE SNC-Lavalin