Stuart Olson Reports Fourth Quarter and Full Year Results and Declares Quarterly Dividend

Higher Contract Income, EBITDA and Net Earnings; Stable $2.0B Backlog

CALGARY, March 1, 2016 /CNW/ – Stuart Olson Inc. (TSX: SOX, SOX.DB.A) (“Stuart Olson” or the “Company”) today announced financial results for the fourth quarter and full year 2015, and declared a quarterly dividend of $0.12 per common share.

“2015 was a year of achievement for Stuart Olson as we focused on core areas of strength in the Buildings Group, expanded the Industrial Group’s base of “MRO” or maintenance, repair and operations work, and maintained our robust $2.0 billion backlog with key contract wins across the country,” said David LeMay, President and CEO of Stuart Olson.

“Our strategies contributed to stronger 2015 financial performance, including significantly higher EBITDA and net earnings results. Against a backdrop of low oil prices and weaker economic conditions in Alberta, these results underscore the benefits of our balanced mix of public, private and industrial projects, our diligent cost containment strategies and our access to multiple geographic markets in Canada.”

“I am also pleased to report that subsequent to the year-end, on February 24, 2016, one of our longstanding oil sands customers awarded us one of the largest long-term industrial contracts in Stuart Olson’s history. This five-year contract is valued at approximately $500.0 million and involves the provision of a diverse range of Industrial Group services. In the context of a ‘lower for longer’ oil price environment, this award affirms our strategy of expanding and vertically integrating our Industrial Group and sets the stage for new opportunities in 2016 and beyond.”


Three months ended Year ended
December 31 December 31
$ millions, except percentages and per share amounts 2015 2014(2) 2015 2014(2)
Contract revenue 283.1 364.5 1,151.4 1,306.3
Contract income 30.7 32.3 121.7 115.7
Contract income margin 10.8% 8.9% 10.6% 8.9%
EBITDA 11.5 13.7 51.1 43.4
EBITDA margin 4.1% 3.8% 4.4% 3.3%
Net earnings from continuing operations 2.1 1.2 11.2 7.1
Net earnings (loss) from discontinued operations nil (0.7) nil (20.2)
Net (loss) earnings 2.1 0.5 11.2 (13.1)
Earnings (loss) per share
Basic from continuing operations 0.08 0.05 0.42 0.29
Basic earnings (loss) per share 0.08 0.02 0.42 (0.52)
Diluted from continuing operations 0.08 0.05 0.39 0.28
Diluted earnings (loss) per share 0.08 0.02 0.39 (0.53)
Dividends declared per share 0.12 0.12 0.48 0.48
Adjusted free cash flow 11.2 7.0 33.7 18.2
Adjusted free cash flow per share 0.42 0.28 1.28 0.73
$ millions Dec. 31,
Dec. 31,
Backlog 1,960.9 1,986.8
Working capital(1) 64.4 54.4
Long-term debt (excluding current portion) 46.6 0.8
Convertible debentures (excluding equity portion)(1) 72.5 155.8
Total assets 646.8 783.6

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”, “EBITDA”, “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 2015 Management’s Discussion & Analysis.

Full Year 2015 Overview

  • For the twelve months ended December 31, 2015, contract income increased 5.2% to $121.7 million on consolidated revenue of $1,151.4 million. This compares to contract income of $115.7 million on consolidated revenue of $1,306.3 million in 2014. Contract income margin improved to 10.6% from 8.9%, primarily reflecting higher margins from the Buildings Group and Commercial Systems Group, as well as the benefit of project timing on intersegment eliminations.
    • The Industrial Group generated revenue of $406.7 million and contract income of $48.5 million, down 0.3% and 5.5% respectively, compared to 2014. Contract income margin of 11.9% was slightly below the 12.6% margin achieved in 2014. The year-over-year changes reflect the reduction in new oil sands construction activity and the wind-down of a significant one-time oil sands project that benefitted 2014 results. These impacts were largely offset by increased activity related to the Industrial Group’s Northwest Territories mining project and by the addition of revenue from the Studon business acquired in January 2015.
    • The Buildings Group generated higher contract income on lower revenues as it undertook the planned wind-down of industrial site project activity, completed a number of projects that had provided significant revenue in 2014 and previous years, and was in the pre-construction phase on a number of new projects in 2015. Revenue of $548.5 million was 20.9% lower year-over-year, while contract income increased 14.0% to $38.2 million. Contract income margin increased to 7.0% from 4.8% in 2014.
    • Commercial Systems Group revenue of $233.5 million was 3.6% lower year-over-year, reflecting project timing. Contract income of $31.4 million was similar to the $32.0 million achieved in 2014 and contract income margin increased to 13.4% from 13.2% last year.
  • EBITDA increased 17.7% to $51.1 million, from $43.4 million in 2014, primarily as a result of the higher contract income. EBITDA margin improved to 4.4% from 3.3%.
  • Net earnings from continuing operations grew 57.7% to $11.2 million (diluted earnings per share of $0.39), from $7.1 million (diluted earnings per share of $0.28) in 2014.
  • Net earnings for 2015 increased to $11.2 million (diluted earnings per share of $0.39), a $24.3 million improvement compared to a net loss of $13.1 million (diluted loss per share of $0.53) in 2014. The 2014 results included a $20.2 million net loss (diluted loss per share of $0.81) from discontinued operations related to the former Broda business.
  • Adjusted free cash flow improved to $33.7 million in 2015 (adjusted free cash flow per share of $1.28) from $18.2 million in 2014 (adjusted free cash flow per share of $0.73), driven by improved operating performance and reductions in capital expenditures.
  • Stuart Olson ended 2015 with a strong $2.0 billion backlog that includes a diverse mix of public, private and industrial projects in BC, Alberta, Manitoba, Saskatchewan, Ontario and the Northwest Territories. The backlog is predominantly made up of low-risk contract arrangements, including 57.9% construction management, 28.2% cost-plus and 5.3% design-build contracts. Tendered (hard-bid) work represents 8.6% of the backlog.
  • Stuart Olson declared and paid annual dividends of $0.48 per common share in 2015. On March 1, 2016, the Board of Directors (“Board”) declared a quarterly common share dividend of $0.12 per share. The dividend is designated as an eligible dividend under the Income Tax Act (Canada) and is payable April 14, 2016 to shareholders of record on March 31, 2016.

Fourth Quarter (Q4) 2015 Overview

  • For the three months ended December 31, 2015, contract income decreased 5.0% to $30.7 million on consolidated revenue of $283.1 million. This compares to contract income of $32.3 million on consolidated revenue of $364.5 million in Q4 2014. Contract income margin improved to 10.8% from 8.9% as improvements for the Buildings Group and Commercial Systems Group were partially offset by lower margin from the Industrial Group and the impact of project timing on intersegment eliminations.
    • Fourth quarter revenue from the Industrial Group increased by 10.7% to $110.0 million in 2015. The year-over-year improvement reflects increased activity on the mine project in the Northwest Territories and added revenue from the acquired Studon business, partially offset by a reduction in new oil sands construction activity and the wind-down of a large one-time oil sands construction project that benefitted Q4 2014 results. Industrial Group contract income declined 6.1% to $12.3 million and contract income margin decreased to 11.2% from 13.2%. These changes reflect challenging conditions in the oil sands, an increased proportion of lower risk cost-reimbursable MRO work in the project mix, and the absence of project close-out margins earned on projects approaching completion in Q4 2014.
    • The Buildings Group generated higher contract income on lower revenues, reflecting the move away from higher-risk industrial site projects and the completion of a number of projects in 2015 that provided significant revenue in 2014. Fourth quarter revenue of $121.2 million declined 43.9% year-over-year, while contract income increased 7.8% to $11.1 million. Contract income margin increased to 9.2% from 4.8% in Q4 2014.
    • Commercial Systems Group revenue of $59.4 million was 1.8% lower year-over-year reflecting project mix and timing. Contract income increased 3.5% to $8.8 million, and contract income margin increased to 14.8% from 14.0%, primarily reflecting the changes in project stage of completion.
  • Fourth quarter EBITDA decreased 16.1% to $11.5 million, primarily reflecting lower contract income and higher administrative costs, excluding administrative depreciation and amortization. EBITDA margin increased to 4.1% from 3.8% in the same period last year.
  • Fourth quarter net earnings from continuing operations grew to $2.1 million (diluted earnings per share of $0.08), from $1.2 million (diluted earnings per share in Q4 2014 of $0.05). The year-over-year improvement reflects lower administrative depreciation and amortization and finance costs.
  • Net earnings for the fourth quarter 2015 period increased to $2.1 million (diluted earnings per share of $0.08), a $1.6 million improvement from net earnings of $0.5 million (diluted loss per share of $0.02) in the fourth quarter of 2014. The Q4 2014 results included a $0.7 million loss related to the former Broda business.


Stuart Olson expects consolidated revenue for 2016 to be similar to the level achieved in 2015. The revenue outlook is supported by a stable $2.0 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 has been successful in winning significant new business both within Alberta and beyond. This outlook is balanced with the potential for unknown impacts from the current “lower for longer” commodity pricing environment.

EBITDA and EBITDA margin are expected to modestly decline in 2016 reflecting the continuation of challenging economic conditions in the Alberta market and an increased proportion of lower-risk MRO projects for our Industrial Group. The EBITDA outlook also reflects the partial reversal of intercompany eliminations that favourably impacted 2015 results.

Stuart Olson’s outlook for its three business groups is as follows:

  • Industrial Group 2016 revenue is expected to be relatively consistent with 2015, supported by a large and growing base of oil sands MRO work. The Industrial Group significantly strengthened its MRO base in 2015 and early 2016 with the addition of new and extended master services agreements with oil sands customers, including the $500.0 million award on February 24, 2016. The group’s outlook is further supported by the execution of large industrial projects outside of Alberta, including a power distribution contract in Manitoba and the Northwest Territories mining project. EBITDA and EBITDA margins from the Industrial Group are expected to be weaker year-over-year as a result of competitive market pressures in Alberta and the higher proportion of lower-risk, cost reimbursable MRO projects in the revenue mix.
  • The Buildings Group anticipates higher EBITDA and EBITDA margin in 2016 on slightly lower revenue compared to 2015. This outlook reflects the group’s significantly reduced exposure to higher-risk industrial site projects. Buildings Group revenue will be supported by predominantly public projects in multiple provinces, including the group’s growing base of work in Ontario.
  • Commercial Systems Group revenue is expected to be similar to 2015 levels. This outlook reflects consistent demand for the group’s highly specialized services across Western Canada. EBITDA margins are expected to be slightly lower compared to 2015, reflecting the competitive market environment in Alberta.

Stuart Olson will hold a conference call and webcast to discuss its fourth quarter and full year 2015 results on March 2, 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 our website at www.stuartolson.com. For those unable to listen during the live webcast, a replay will be available on Stuart Olson’s 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 Thursday, March 17, 2016, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 060168. The public is invited to listen to the live conference call, webcast or the replay.

About Stuart Olson Inc.

Stuart Olson Inc. provides building construction, commercial and industrial electrical contracting, and industrial insulation services to an array of public and private sector clients. 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. This forward-looking information includes, without limitation, the statements relating to:

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 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.

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.