Stuart Olson Reports Third Quarter Results

Significantly improved balance sheet leverage and strong liquidity
Dividend payout ratio of 36.0%
31st consecutive quarterly dividend of $0.12 per common share declared
Approximately $205 million added to consolidated backlog

CALGARYNov. 6, 2018 /CNW/ – Stuart Olson Inc. (TSX: SOX, SOX.DB.A) (“Stuart Olson” or the “Company”) today announced third quarter 2018 financial results, and declared its 31st consecutive quarterly dividend of $0.12 per common share.

“Our geographic and sector diversification strategies enabled us to deliver third quarter adjusted EBITDA of almost $12 million and an 18% year-to-date increase year-over-year. At the same time, we strengthened our balance sheet with meaningfully improved leverage and strong liquidity,” said David LeMay, President and CEO of Stuart Olson.

“We also added approximately $205 million to our consolidated backlog during the quarter. Key contract wins included our Buildings Group being awarded construction of a health care facility in British Columbia and an event centre expansion project in Alberta. Our Commercial Systems Group also secured a number of new projects, including several residential towers in British Columbia.”

“All three of our operating groups continue to actively bid on a robust pipeline of projects as we maintain our focus on sector and geographic diversification and operational excellence,” added Mr. LeMay.


Three months ended Nine months ended
September 30 September 30
$ millions, except percentages and per share amounts 2018 2017 2018 2017
Contract revenue 223.7 268.1 738.8 734.7
Contract income 24.7 28.5 74.5 69.2
Contract income margin 11.0% 10.6% 10.1% 9.4%
Adjusted EBITDA 11.8 11.7 28.9 24.5
Adjusted EBITDA margin 5.3% 4.4% 3.9% 3.3%
Net earnings (loss) 3.9 3.6 6.6 3.9
Earnings (loss) per share
Basic earnings (loss) per share 0.14 0.13 0.24 0.14
Diluted earnings (loss) per share 0.12 0.11 0.24 0.14
Dividends declared per share 0.12 0.12 0.36 0.36
Adjusted free cash flow 10.2 10.0 19.6 13.6
Adjusted free cash flow per share 0.37 0.37 0.71 0.50
$ millions Sep. 30 2018 Dec. 31 2017
Backlog 1,584.3 1,721.4
Working capital 68.3 33.1
Long-term debt (excluding current portion) 30.5 6.0
Convertible debentures (excluding equity portion) 77.7 76.2
Total assets 609.0 630.3

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 September 30, 2018 Management’s Discussion & Analysis (“MD&A”).


  • Consolidated revenue was $223.7 million in the third quarter (“Q3”) of 2018, compared to $268.1 million in Q3 2017. The year-over-year change reflects a decline in Buildings Group activity levels associated with the stage of completion of a number of projects, combined with the completion of two large Industrial Group projects that contributed approximately $29.0 million of additional revenue in Q3 of last year. These impacts were partially offset by growing revenues from the Commercial Systems Group as it continues to benefit from the significant project awards secured in 2017.
  • Adjusted EBITDA of $11.8 million improved slightly from the $11.7 million generated in Q3 2017. Adjusted EBITDA margin increased to 5.3% from 4.4% in Q3 2017.
  • Third quarter net earnings increased to $3.9 million (diluted earnings per share, or “EPS”, of $0.12), from $3.6 million (diluted EPS of $0.11) in Q3 2017.
  • Adjusted free cash flow grew to $10.2 million ($0.37 per share), an increase of $0.2 million from the $10.0 million ($0.37 per share) generated in Q3 2017.
  • The Company ended the third quarter with a cash balance of $26.3 million and additional borrowing capacity of approximately $103.1 million, providing combined available liquidity of $129.5 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 change in available liquidity primarily relates to the use of cash and a draw on its Revolving Credit Facility (“Revolver”) to fund a number of investments in non-cash working capital in 2018, including the funding of working capital required for ordinary operations, the funding of normal course final project adjustments and the usual payment of incentive compensation in the second quarter of the year.
  • Net long-term indebtedness to adjusted EBITDA ratio was 2.2x as at September 30, 2018, below the 2.4x recorded at September 30, 2017. The improvement reflects the $10.2 million or 33.8% 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 requirements in 2018.
  • Stuart Olson achieved a dividend payout ratio of 36.0% for the LTM period ended September 30, 2018.
  • On November 6, 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 January 16, 2019 to shareholders of record on December 31, 2018.
    • Since the introduction of the quarterly dividend in June 2011, Stuart Olson has consistently paid $0.12 per share for thirty-one consecutive quarters. Including the dividend declared today, this represents $3.72 per share or $96.1 million returned to shareholders.
  • The Company ended the quarter with a backlog of $1.6 billion. 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 third quarter of 2018, Stuart Olson added approximately $205.0 million of projects to backlog. These included awards to the Buildings Group to expand an event centre in Alberta and construct a health care facility in British Columbia, as well as a number of awards to the Commercial Systems Group, including several residential towers in British Columbia.
  • On August 30th, 2018 Stuart Olson announced changes to its Board of Directors, including the appointments of Raymond D. Crossley and David C. Filmon.
  • Subsequent to quarter end, on November 6, 2018 Stuart Olson announced it had acquired 100% of the issued and outstanding shares of Tartan Canada Corporation (“Tartan”), a privately held industrial services provider in Western Canada, specializing in the provision of mechanical maintenance services to the oil and gas, pulp and paper, petrochemical and power sectors.
    • Please refer to the Stuart Olson press release dated November 6, 2018 labeled “Stuart Olson Completes Acquisition of Tartan Canada Corporation” for further information on this acquisition.


Stuart Olson Consolidated

  • As compared to 2017, Stuart Olson expects 2018 consolidated adjusted EBITDA and adjusted EBITDA margin to be slightly higher, and consolidated contract revenue to be slightly lower, based on the outlook for each of its operating groups.
  • The acquisition of Tartan on November 6, 2018 is not expected to have a material impact on the 2018 financial results for consolidated Stuart Olson or the Industrial Group given that November and December are seasonally lower months for the business.

Industrial Group

  • Revenue and adjusted EBITDA from the Industrial Group are expected to be meaningfully and slightly lower respectively in 2018 than in 2017, while adjusted EBITDA margin is expected to be modestly higher year-over-year.
  • This outlook, which has been updated from the June 30, 2018 MD&A, is based on the impact of commodity pricing, particularly the widening of the oil price differential between West Texas Intermediate and Western Canadian Select, which has negatively impacted owners capital spending and increased competitive conditions in certain Industrial Group markets. This has affected the group’s ability to secure new awards for execution in 2018.
  • Longer term, the Industrial Group’s business continues to be supported by a backlog of stable MRO work, including the recently acquired Tartan backlog, and the group’s continued disciplined pursuit of new projects is supported by a strong pipeline of opportunities across a diverse range of industrial sectors.

Buildings Group

  • With a greater proportion of projects nearing completion in 2018 compared to 2017, the Buildings Group anticipates meaningfully lower revenue year-over-year, paired with slightly lower adjusted EBITDA and modestly higher adjusted EBITDA margin.
  • The Buildings Group’s results as a whole will continue to be supported by predominantly public projects in multiple provinces.
  • The group’s outlook has been updated from the June 30, 2018 MD&A to reflect changes in the expected timing of projects in backlog.
  • Longer term, the Buildings Group sees a continued pipeline of public projects arising from infrastructure spending at both the provincial and federal levels across Canada.  The group’s disciplined pursuit includes focusing on alternative contracting methods and the development of partnership opportunities to position us well for future success.

Commercial Systems Group

  • Commercial Systems Group revenue is expected to be significantly higher in 2018, as the group benefits from the substantial awards it secured in 2017. Adjusted EBITDA is expected to be meaningfully lower year-over-year, while adjusted EBITDA margin is expected to be significantly lower.
  • The change in this group’s outlook from the June 30, 2018 MD&A, as well as the change year-over-year, reflects lower-than-usual margins on projects in the first three quarters of the year. Margins have been lower than normal due to competitive pricing pressures as a result of market shifts in the group’s busiest region (Alberta), more competitive margins on recent awards due to an increased exposure to the multi-family residential sector in British Columbia and margin expectations in the group’s new Ontario geography that are lower than historical levels in legacy markets. The group has also been impacted by productivity challenges on a specific project in 2018. The change in margin year-over-year also reflects the group being in earlier stages of completion on a number of larger projects.
  • Longer term, the Commercial Systems Group expects to benefit from private and public opportunities in all of its markets, particularly in the very active markets of British Columbia and Ontario.

Corporate Group

  • Stuart Olson expects Corporate Group adjusted EBITDA to significantly improve in 2018 compared to 2017.
  • The improvement in the Corporate Group’s outlook reflects the impact of marking-to-market share-based compensation expense in the third quarter of 2018.


Stuart Olson will hold a conference call and webcast to discuss its 2018 third quarter results on Wednesday, November 7, 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 Wednesday, November 21, 2018 by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 580619. 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:

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