Stuart Olson Reports Second Quarter Results

Second quarter adjusted EBITDA up 27%
Approximately $250 million added to consolidated backlog
30th consecutive quarterly dividend of $0.12 per common share declared
Dividend payout ratio improves to 35.7%

CALGARYAug. 9, 2018 /CNW/ – Stuart Olson Inc. (TSX: SOX, SOX.DB.A) (“Stuart Olson” or the “Company”) today announced second quarter 2018 financial results, and declared its 30th consecutive quarterly dividend of $0.12 per common share.

“In the second quarter we again delivered significantly higher year-over-year adjusted EBITDA, while improving our dividend payout ratio to 35.7%,” said David LeMay, President and CEO of Stuart Olson.

“We also added approximately $250 million to our consolidated backlog during the quarter. In addition to the previously announced award of a project to construct a large agricultural facility in Western Canada, the Buildings Group was also awarded two construction management projects with a repeat post-secondary institution client in the group’s growing Ontario market, as well as another strategic horizontal infrastructure award in British Columbia. Our Commercial Systems Group was also awarded a number of smaller projects, including work on a transportation facility in Alberta and projects to upgrade public facilities in Manitoba.”

“In terms of full-year 2018, we continue to expect meaningfully higher year-over-year adjusted EBITDA as we focus our organization on operational excellence and sector and geographic diversification,” added Mr. LeMay.


Three months ended Six months ended
June 30 June 30
$ millions, except percentages and per share amounts 2018 2017 2018 2017
Contract revenue 249.3 246.4 515.1 466.5
Contract income 25.5 20.6 49.8 40.7
Contract income margin 10.2% 8.4% 9.7% 8.7%
Adjusted EBITDA 9.0 7.1 17.1 12.8
Adjusted EBITDA margin 3.6% 2.9% 3.3% 2.7%
Net earnings (loss) 1.1 0.5 2.7 0.3
Earnings (loss) per share
Basic earnings (loss) per share 0.04 0.02 0.10 0.01
Diluted earnings (loss) per share     0.04 0.02 0.10 0.01
Dividends declared per share 0.12 0.12 0.24 0.24
Adjusted free cash flow 3.8 (0.1) 9.5 3.6
Adjusted free cash flow per share 0.14 nil 0.35 0.13
$ millions Jun. 30,
Dec. 31,
Backlog 1,603.2 1,721.4
Working capital 88.3 33.1
Long-term debt (excluding current portion) 54.5 6.0
Convertible debentures (excluding equity portion) 77.2 76.2
Total assets 638.3 630.3

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”, “adjusted free cash flow per share”, “dividend payout ratio”, “additional borrowing capacity”, “available liquidity” and “net long-term indebtedness to adjusted EBITDA”, are not prescribed measures under IFRS. For a description of these measures, see the “Non-IFRS Measures” section in Stuart Olson’s June 30, 2018 Management’s Discussion & Analysis (“MD&A”).


  • Consolidated revenue grew to $249.3 million in Q2 of 2018, from $246.4 million in Q2 2017. The year-over-year improvement reflects growing revenues from the Commercial Systems Group as it continues to benefit from the significant project awards secured in 2017, partially offset by a project stage of completion driven decline in Buildings Group activity levels.
  • Adjusted EBITDA grew 26.8% to $9.0 million (adjusted EBITDA margin of 3.6%), from $7.1 million (adjusted EBITDA margin of 2.9%) in Q2 2017. The improvement reflects strong project performance combined with a shift to later-stage phases on a number of projects in both the Industrial Group and Buildings Group and higher activity levels within the Commercial Systems Group. These gains were partially offset by increased costs related to investments in organic growth initiatives and an increase in share-based compensation expense as a result of the increase in the Company’s share price in 2018.
  • Second quarter net earnings increased by $0.6 million to $1.1 million (diluted earnings per share, or “EPS”, of $0.04), from $0.5 million (diluted EPS of $0.02) in Q2 2017. This gain was largely driven by the improvement in adjusted EBITDA, partially offset by the recognition of $1.4 million in restructuring costs in Q2 2018 as the Company continues to strategically realign its organization to support its businesses while improving operational leverage.
  • Adjusted free cash flow grew to an inflow of $3.8 million ($0.14 per share) in Q2 2018, from an outflow of $0.1 million (nil per share) in the same quarter last year. Higher year-over-year adjusted EBITDA was the key factor in this $3.9 million ($0.14 per share) improvement. Prior-year results were also negatively impacted by a change in provisions due to ordinary warranty costs recognized on two large projects that reached substantial completion.
  • The Company ended the second quarter with a cash balance of $21.7 million and additional borrowing capacity of approximately $86.0 million, providing combined available liquidity of $107.7 million. This compares to combined available liquidity of $153.9 million as at December 31, 2017, which included $31.7 million of cash and $122.2 million of additional borrowing capacity. The decline in available liquidity primarily relates to the use of cash and a draw on the Company’s Revolving Credit Facility (“Revolver”) to fund a number of investments in non-cash working capital in the second quarter, including:
    • a shift in project stage of completion for the Buildings Group and Industrial Group, with a number of larger projects completing and newer projects in preconstruction stages,
    • a temporary increase in receivables and costs in excess of billings in the Commercial Systems Group related to the group’s Q2 2018 implementation of a new enterprise resource planning system,
    • the funding of working capital related to normal course final project adjustments, and
    • the usual payment of incentive compensation in the second quarter of the year.
  • The net long-term indebtedness to adjusted EBITDA ratio was 2.9x as at June 30, 2018, below the 3.2x recorded at June 30, 2017. The improvement reflects the $11.8 million or 41.4% year-over-year increase in last twelve-month (“LTM”) adjusted EBITDA, partially offset by the use of cash and a draw on the Company’s Revolver in order to fund working capital in 2018.
  • Stuart Olson achieved a dividend payout ratio of 35.7% for the LTM period ended June 30, 2018.
  • On August 9, 2018, 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 October 16, 2018 to shareholders of record on September 28, 2018.
    • Since the introduction of the quarterly dividend in June 2011Stuart Olson has consistently paid $0.12 per share for thirty consecutive quarters. Including the dividend declared today, this represents $3.60 per share or $92.8 million returned to shareholders.
  • The Company ended the quarter with a backlog of $1.6 billion, reflecting a book-to-bill ratio for the quarter of 1.00. The backlog includes a diverse mix of public, private and industrial projects from Ontario to British Columbia and is predominantly made up of low-risk contract arrangements.
    • During the second quarter of 2018, Stuart Olson added approximately $250.0 million of projects to backlog, predominantly made up of Buildings Group awards. These included:
      • a project to construct a large agricultural facility in Western Canada,
      • two projects with a post-secondary institution in the Ontario market, and
      • another strategic horizontal infrastructure award in British Columbia.
  • During the quarter David LeMayStuart Olson’s CEO, assumed leadership duties for the Buildings Group on an interim basis. Mr. LeMay replaces Arthur Atkinson, who is no longer with the Company.


Stuart Olson Consolidated

  • As compared to 2017, Stuart Olson expects 2018 consolidated contract revenue to be slightly higher, adjusted EBITDA to be meaningfully higher and adjusted EBITDA margin to remain stable, based on the outlook for each of its operating groups to follow.

Industrial Group

  • Adjusted EBITDA from the Industrial Group is expected to be modestly higher in 2018 than in 2017, while revenue and adjusted EBITDA margin are expected to be slightly higher year-over-year.
  • This outlook reflects an anticipated increase in activity levels in the oil sands, as project owners plan to complete increased scopes of maintenance and turnaround work that had been deferred in recent years. The group’s financial results are also expected to be supported by the completion of two large projects outside Alberta in the power and mining sectors.
  • The Company’s outlook for this group has changed from its March 31, 2018 MD&A based on more competitive conditions than expected in certain of the Industrial Group’s markets.

Buildings Group

  • With a greater proportion of projects nearing completion in 2018 compared to 2017, the Buildings Group anticipates modestly lower revenue year-over-year, paired with stable adjusted EBITDA and slightly higher adjusted EBITDA margin.
  • The Buildings Group’s results as a whole will continue to be supported by predominantly public projects in multiple provinces, including the group’s growing market presence in Ontario.

Commercial Systems Group

  • Commercial Systems Group revenue is expected to be significantly higher in 2018, while adjusted EBITDA is expected to be modestly higher year-over-year, as the group begins to see benefits from the substantial number of project awards it secured in 2017. The group’s adjusted EBITDA margin is expected to be modestly lower year-over-year. This reflects the group being in earlier stages of completion on a number of larger projects, together with lower-than-usual margins on some projects, in part due to increased competition.
  • The change in this group’s outlook reflects planned increases to project margins not materializing as originally anticipated.

Corporate Group

  • Stuart Olson expects Corporate Group adjusted EBITDA to slightly improve in 2018 compared to 2017.


Stuart Olson will hold a conference call and webcast to discuss its 2018 second quarter results on Friday, August 10, 2018 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 Friday, August 24, 2018 by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 558699. The public is invited to listen to the live conference call, webcast or the replay.


Stuart Olson Inc. provides general contracting and electrical building systems contracting in the public and private construction markets as well as general contracting, electrical, mechanical and specialty trades, such as insulation, cladding and asbestos abatement, in the industrial construction and services market. The Company operates office locations and projects throughout Western CanadaOntario and the territories. Stuart Olson was recognized as one of Alberta’s Top 70 Employers in 2018 for the second consecutive year. 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


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 made under the section titled “2018 Outlook” including, without limitation, those relating to:

(a)  revenue projections;
(b)  Stuart Olson’s backlog and the implication that such backlog will be converted into revenues;
(c)  2018 adjusted EBITDA and adjusted EBITDA margin projections;
(d)  economic conditions;
(e)  the outlook for each of Stuart Olson’s operating groups.

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”, “seek”, “continue”, “see”, “project”, “predict”, “propose”, “targeting”, “potential”, “could”, “might”, “grow”, “momentum” 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.

David LeMay, President and Chief Executive Officer, Stuart Olson Inc., (403) 685-7777, Email: inquiries@stuartolson.com; Daryl Sands, Executive Vice President and Chief Financial Officer, Stuart Olson Inc., (403) 685-7777, Email: inquiries@stuartolson.com