Stuart Olson Reports Third Quarter 2015 Results and Declares Quarterly Dividend

Contract Income Increases 19.0%, EBITDA up 45.9%, Stable $2.0B Backlog

CALGARY, Nov. 8, 2015 /CNW/ – Stuart Olson Inc. (TSX: SOX, SOX.DB.A) (“Stuart Olson” or the “Company”) today announced financial results for the third quarter and first nine months of 2015 and declared a quarterly dividend of $0.12 per common share.

“Our focus on core areas of strength in the Buildings Group, together with strong project execution across our operations, contributed to improved financial performance in the third quarter,” said David LeMay, President and CEO of Stuart Olson. “While revenue was lower as we had expected, contract income increased by 19.0% year-over-year and EBITDA was up 45.9% to $15.9 million.”

“Our outlook for 2015 continues to remain positive, in light of the backdrop of challenging conditions in the Alberta market. We are executing effectively on our large $2.0 billion backlog, and our diversified access to public, private and industrial construction markets across Canada is contributing to a strong pipeline of new project opportunities in multiple provinces.”


Three months ended Nine months ended
September 30 September 30
$ millions, except percentages and per share amounts 2015 2014 2015 2014
Contract revenue 281.7 350.4 868.3 941.7
Contract income 34.4 28.9 91.0 83.4
Contract income margin 12.2% 8.2% 10.5% 8.9%
EBITDA (1) 15.9 10.9 39.6 29.7
EBITDA margin 5.6% 3.1% 4.6% 3.2%
Net earnings from continuing operations 6.4 2.8 9.1 6.0
Net (loss) earnings from discontinued operations nil (15.7) nil (19.5)
Net earnings (loss) 6.4 (12.9) 9.1 (13.5)
Earnings (loss) per share
Basic from continuing operations 0.24 0.11 0.35 0.24
Basic earnings (loss) per share 0.24 (0.52) 0.35 (0.54)
Diluted from continuing operations 0.18 0.11 0.30 0.24
Diluted earnings (loss) per share 0.18 (0.52) 0.30 (0.54)
Dividends declared per share 0.12 0.12 0.36 0.36
$ millions Jun. 30,
Dec. 31,
Backlog (1) 2,017.1 1,986.8
Working capital(1)(2) 58.8 54.4
Long-term debt, excluding current portion 58.3 0.8
Convertible debentures (excluding equity portion)(2) 72.1 155.8
Total assets 734.9 783.6

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”, and “working capital”, are not prescribed measures under IFRS. For a description of these measures, see the “Non-IFRS Measures” section in Stuart Olson’s Q3 2015 Management’s Discussion & Analysis.

Third Quarter Overview

  • For the three months ended September 30, 2015, contract income increased 19.0% to $34.4 million on consolidated revenue of $281.7 million. This compares to contract income of $28.9 million on consolidated revenue of $350.4 million in Q3 2014. Consolidated contract income margin improved to 12.2% from 8.2%, primarily reflecting higher margins from the Buildings Group and the benefit of project timing on intersegment eliminations.
    • The Industrial Group generated revenue of $107.6 million and contract income of $14.7 million, down 7.2% and 3.9% respectively, compared to Q3 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 partially offset by increased activity related to the group’s mining contract in the Northwest Territories and by the addition of revenue from the Studon business acquired in January 2015.
    • Buildings Group revenue of $131.1 million declined 27.8% year-over-year, while contract income increased 68.3% to $10.6 million as the group continued its planned wind-down of industrial site project activity and increased its focus on core areas of strength.
    • Commercial Systems Group revenue of $53.2 million was 15.3% lower year-over-year reflecting project mix, as well as reduced activity levels in Alberta. Contract income of $7.7 million was down 6.1%, but as a percentage of income, increased to 14.5% from 13.1%, reflecting successful risk mitigation on a number of large projects that moved into later stages during the period.
  • EBITDA increased 45.9% to $15.9 million, from $10.9 million in Q3 2014, primarily reflecting the higher contract income. EBITDA margin improved to 5.6% from 3.1%.
  • Third quarter net earnings from continuing operations grew to $6.4 million (diluted earnings per share of $0.18), from $2.8 million (diluted earnings per share in Q3 2014 of $0.11). Higher contract income and the temporary impact of timing on intersegment eliminations were the key factors in this improvement, partially offset by increased amortization associated with the intangibles recorded as part of the Studon acquisition.
  • Net earnings for the period increased to $6.4 million (diluted earnings per share of $0.18), a $19.3 million improvement from the net loss of $12.9 million (diluted loss per share of $0.52) recorded in the third quarter of 2014. The Q3 2014 results included a $15.7 million loss on disposal of the former Broda business.
  • During Q3 2015, the Company recognized a $4.0 million impairment of Studon’s intangible assets and a recovery of $2.9 million related to revaluing the Studon earn out liability to fair value. Both impacts reflect that Alberta’s energy sector will be impacted by lower oil prices for a longer period than originally anticipated.
  • Backlog of $2.0 billion includes a diverse mix of public, private and industrial projects in BC, Alberta, Manitoba, Saskatchewan, Ontario and the Northwest Territories. The backlog consists of predominantly lower-risk contracts, including 59.1% construction management contracts, 27.3% cost-plus arrangements and 5.5% design-build contracts. Tendered (hard-bid) work represents approximately 8.1% of the backlog.
  • During the third quarter, Stuart Olson announced $250.0 million in new awards, including:
    • A $90.0 million design-build project with Ontario’s largest post-secondary institution.
    • A $90.0 million three-year renewal to a master services agreement to provide maintenance, repair and operations (“MRO”) services to a longstanding oil sands customer.
    • Two projects totaling $70.0 million for the Buildings Group in Alberta.
  • On July 16, 2015, Stuart Olson successfully amended its revolving credit facility, extending it by three years and negotiating improved terms and conditions.
  • As at September 30, 2015, the Company was in full compliance with the debt covenants under its revolving credit facility, had available cash of $34.6 million and additional borrowing capacity of approximately $106.5 million.
  • Stuart Olson’s Board of Directors declared a quarterly dividend of $0.12 per common share. The dividend will be paid on January 14, 2016 to shareholders of record on December 31, 2015. The Company has a dividend reinvestment plan in place; details are available on Stuart Olson’s website (www.stuartolson.com).


Stuart Olson continues to anticipate that consolidated revenue for 2015 will be lower than in 2014, while EBITDA and EBITDA margin will be higher. This outlook reflects the Buildings Group’s shift away from higher-risk industrial site projects, which is resulting in lower revenue but improved margins. Revenue is also expected to be negatively impacted by reduced demand for new industrial construction in Alberta, although this impact will be offset by the addition of Studon revenue in 2015, the addition of industrial contracts in the Northwest Territories and Manitoba and by stable volumes of maintenance work in Alberta. The Company continues to see good opportunities for infrastructure projects in all of its geographic markets, in particular with growing infrastructure spending at the Alberta and Federal government levels, and is moving forward with a strong $2.0 billion backlog dominated by public infrastructure projects distributed across multiple provinces.

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

  • The legacy Industrial Group businesses and the Studon business are expected to experience a year-over-year reduction in revenue related to the decline in industrial construction opportunities in Alberta. In addition, in 2015 the legacy industrial business completed a large construction project that significantly benefited 2014 results. Consolidated Industrial Group EBITDA margins are expected to be weaker year-over-year as a result of increased competition, oil sands operators seeking supplier cost reductions in response to lower oil prices, and an increased proportion of lower-risk cost reimbursable MRO projects in the revenue mix.
  • The Buildings Group anticipates higher EBITDA and EBITDA margins on lower revenue compared to 2014 as a result of reduced exposure to higher-risk industrial site projects.
  • Commercial Systems Group revenue and EBITDA margins for 2015 are expected to be slightly lower than the very strong levels achieved in 2014, reflecting reduced activity in the Alberta market, project stage of completion and the impact of competitive pressures on margins for new work.

Stuart Olson will hold a conference call and webcast to discuss its third quarter and first nine months 2015 results on November 9, 2015 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 Monday, November 30, 2015, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 072510. The public is invited to listen to the live conference call, webcast or the replay.

Stuart Olson’s third quarter Condensed Consolidated Interim Financial Statements and Management’s Discussion and Analysis are available in the Financials and Filings subsection under Investor Relations on our website at www.stuartolson.com, as well as under the Company’s profile at www.sedar.com.

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 related to Stuart Olson’s expectations regarding revenue visibility and generation, EBITDA and EBITDA margin realization, backlog execution and opportunities for infrastructure projects in Western Canada. 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.