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SNC-Lavalin announces fourth quarter results, with a 2016 full year adjusted diluted EPS from E&C of $1.51, a 5% increase in dividend and an increase in its outlook for 2017

by pmnationtalk on March 2, 2017145 Views

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SNC-Lavalin announces fourth quarter results, with a 2016 full year adjusted diluted EPS from E&C of $1.51, a 5% increase in dividend and an increase in its outlook for 2017

March 2, 2017

  • Q4 2016 reported IFRS net income of $1.6 million, or $0.01 per diluted share, which included $39.8 million of net loss on disposals and $87.8 million of restructuring costs which should remove a further $100 million from our cost base in 2017. Full year reported IFRS diluted EPS of $1.70.
  • Q4 2016 adjusted net income from E&C(1) of $73.4 million, or $0.49 per diluted share. Full year adjusted diluted EPS from E&C(2) of $1.51. 
  • Q4 2016 SG&A expenses of $213.9 million, 1.7% lower versus Q4 2015. Full year SG&A expenses of $724.1 million, $131.5 million, or 15.4%, lower than 2015.
  • Strong diversified revenue backlog(7) of $10.7 billion as at December 31, 2016. 
  • Quarterly dividend increase of 5% to $0.273 per share.
  • 2017 Outlook: adjusted diluted EPS from E&C(2) in the range of $1.70 to $2.00.

SNC-Lavalin Group Inc. (TSX: SNC) announces its results today for the fourth quarter ended December 31, 2016.

“We were pleased with our 2016 performance, we delivered on our commitments and met our 2016 guidance,” said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. “Going into 2017, we are well positioned within our industry to capitalize on organic growth in infrastructure, nuclear, renewables and sustaining capital across all four sectors and expect our Capital group to continue to perform well driven by Highway 407 ETR. Our diversified business model, solid balance sheet and strong diversified revenue backlog give us confidence that we can meet our growth ambitions. We expect 2017 to be another good year for SNC-Lavalin as we continue to progress in our Operational Excellence efficiency program, drive cost base competitiveness and continue building a performance-driven culture to deliver for our clients.”

  • Q4 2016 reported IFRS net income was $1.6 million, or $0.01 per diluted share, compared to a net income of $49.2 million, or $0.33 per diluted share, for the corresponding period in 2015. Q4 2016 results included a loss of $39.8 million from the disposal of the Company’s Real Estate Facilities Management business and its local French operations and restructuring costs of $87.8 million, which should deliver a further costs reduction of $100 million out of the business in 2017.
  • Adjusted net income from E&C(1) for Q4 2016 increased to $73.4 million, or $0.49 per diluted share, compared to $66.2 million, or $0.44 per diluted share, mainly due to lower SG&A, partially offset by lower gross margin. On a segmented basis, Oil & Gas and Mining & Metallurgy recorded a lower segment EBIT(5) in Q4 2016 compared to Q4 2015, while Infrastructure and Power segment EBIT(5) were in line with Q4 2015.
  • Adjusted net income from Capital(3) for Q4 2016 was $42.6 million, or $0.28 per diluted share, compared with $35.3 million, or $0.23 per diluted share for the corresponding period in 2015, mainly due to a higher level of activity of capital investments and an increase in dividends from Highway 407 ETR.
  • Total selling, general and administrative (SG&A) expenses in Q4 2016 decreased by 1.7%, compared to Q4 2015. For the year ended December 31, 2016, SG&A expenses were $131.5 million lower than the corresponding period in 2015. This decrease included a $32.5 million one off favorable impact from revised estimates on legacy sites environmental liabilities and other asset retirement obligations as described in Q3. Excluding this one off favorable impact, total SG&A expenses decreased by $99.0 million, in line with our target of $100 million reduction for the full year.
  • Total E&C revenue for Q4 2016 was $2.1 billion, compared with $2.6 billion in Q4 2015. The variation was mainly due to a decrease in Oil & Gas, which despite having delivered its strongest quarter of 2016, had revenues lower than Q4 2015 and in the Mining & Metallurgy segment, as it continues to be affected by the persistent softer commodity prices. The Infrastructure and Power segments also had lower revenues in Q4 2016 versus Q4 2015, mainly due to near completion or completion of certain major projects.
  • The revenue backlog(7) totaled $10.7 billion at the end of December 2016. New contract awards for the fourth quarter amounted to $1.9 billion. Total contract awards for 2016 were $7.8 billion, including $4.0 billion in Oil & Gas, $1.7 billion in Power, $1.7 billion in Infrastructure and $0.4 billion in Mining & Metallurgy.
  • The balance sheet remained strong at the end of December 2016 with cash and cash equivalents of $1.1 billion, compared to $0.9 billion at September 30, 2016 and $1.6 billion at December 31, 2015.
2017 Outlook

The Company is targeting an adjusted diluted EPS from E&C(2) for 2017 in the range of $1.70 to $2.00.

While we anticipate continuing market challenges in 2017 in certain of the Company’s sectors, we expect to benefit from our recent restructuring savings and “Operational Excellence” program. As such, we expect increased Segment EBIT(5) margins for all segments in 2017, compared to 2016, except for Mining & Metallurgy.

We anticipate increased Segment EBIT(5) from the Infrastructure and Power segments, mainly driven by North American capital spending growth and global nuclear opportunities, as well as increased Segment EBIT(5) from Oil & Gas, mainly due to increased activities in the Middle East and United States. We expect Mining & Metallurgy Segment EBIT(5) to remain in line with 2016 due to the persistent softer commodity prices, however we do expect an increase in Mining & Metallurgy’s revenue backlog(7).

This outlook is based on the assumptions and methodology described in the Company’s 2016 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

Given the Company’s long-term outlook, cash position and revenue backlog(7) level, the Board of Directors has increased the quarterly cash dividend by 5% to $0.273 per share, payable on March 30, 2017, to shareholders of record on March 16, 2017. This represents the 16th consecutive year that the Company’s dividend per share has been increased. This dividend is an “eligible dividend” for income tax purposes.

Conference Call / Webcast

SNC-Lavalin will hold a conference call today at 3:00 p.m. EST to discuss the fourth quarter results. The telephone numbers to access the conference call are 1 800 263 0877 in North America, 647 794 1827 in Toronto, 438 968 3557 in Montreal, 080 0358 6377 in the United Kingdom, and 180 083 2679 in Ireland. A live audio webcast of the conference call and an accompanying slide presentation will be available at investors.snclavalin.com. A recording of the conference call will be available on our website within 24 hours following the call.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure. From offices in over 50 countries, SNC-Lavalin’s employees are proud to build what matters. Our teams provide engineering, procurement, construction, completions and commissioning services together with a range of sustaining capital services to clients in four industry sectors, oil and gas, mining and metallurgy, infrastructure and power. SNC-Lavalin can also combine these services with its financing and operations and maintenance capabilities to provide complete end-to-end project solutions. www.snclavalin.com

(1) Adjusted net income from E&C is defined as net income attributable to SNC-Lavalin shareholders from E&C, excluding one-time net foreign exchange gains, charges related to restructuring, right-sizing and other, as well as amortization of intangible assets, the financing, acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014 and the loss on disposals of E&C businesses. E&C is defined in the Company’s 2016 financial statements and Management’s Discussion and Analysis. The term “Adjusted net income from E&C” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. 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. See reconciliation below.

(2) Adjusted diluted EPS from E&C is defined as the adjusted net income from E&C divided by the weighted average number of outstanding shares for the period.

(3) Adjusted net income from Capital is defined as net income attributable to SNC-Lavalin shareholders from Capital, excluding the gain on disposals of Capital Investments.

(4) Adjusted diluted EPS from Capital is defined as the adjusted net income from Capital divided by the weighted average number of outstanding shares for the period.

(5) Segment EBIT is defined herein as gross margin less i) directly related selling, general and administrative expenses; ii) corporate selling, general and administrative expenses that are directly related to projects or segments; and iii) non-controlling interests before taxes. Corporate selling, general and administrative expenses that are not directly related to projects or segments, restructuring costs, goodwill impairment, acquisition-related costs and integration costs and amortization of intangible assets related to the Kentz acquisition, as well as gains (losses) on disposals of E&C businesses and Capital investments are not allocated to the Company’s segments. The term “Segment EBIT” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. 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.

(6) Adjusted E&C EBITDA is defined herein as earnings from E&C before net financial expenses (income), income taxes, depreciation and amortization, and excludes one-time net foreign exchange gains, charges related to restructuring, right-sizing and other, as well as the acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014 and the gains (losses) on disposals of E&C businesses and Capital investments. The term “Adjusted E&C EBITDA” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. 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.

(7) Revenue Backlog is defined herein as a forward-looking indicator of anticipated revenues to be recognized by the Company, determined based on contract awards that are considered firm. In order to provide information that is comparable to the revenue backlog of other categories of activity, the Company limits the O&M activities revenue backlog, which can cover a period of up to 40 years, to the earlier of: i) the contract term awarded; and ii) the next five years. The term “Revenue backlog” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s future performance.

SNC-Lavalin Financial Summary

 

(in thousands of Canadian dollars, unless
otherwise indicated)

Fourth Quarter

Year ended
December 31

 

2016

2015

2016

2015

         
Revenues        
From E&C

2,146,484

2,590,297

8,223,085

9,363,508

From Capital

64,653

55,990

247,748

223,446

 

2,211,137

2,646,287

8,470,833

9,586,954

 

 

 


Net income attributable to
SNC-Lavalin shareholders

From E&C

 


(38,435)

13,987

 


46,346

95,834

From Capital

40,011

35,257

209,187

308,502

 

1,576

49,244

255,533

404,336

 

 

 


Diluted EPS ($)

From E&C
From Capital

 

(0.26)
0.27

0.09
0.24

 

0.31
1.39

0.64
2.04

 

0.01

0.33

1.70

2.68

 

 

 

 


Adjusted net income
attributable to SNC-Lavalin
shareholders

From E&C(1)
From Capital(3)

 

 

73,449
42,620

66,186
35,276

 

 

226,397
160,750

201,856
162,802

 

116,069

101,462

387,147

364,658

 

 

 

Adjusted diluted EPS ($)
From E&C(2)
From Capital(4)

 

0.49
0.28

0.44
0.23

 

1.51
1.07

1.34
1.08

 

0.77

0.67

2.58

2.42

 

Adjusted E&C EBITDA(6)
Adjusted E&C EBITDA margin

 

107,971
5.0%

144,831
5.6%

 

371,880
4.5%

433,377
4.6%

 

 

 

 

 

 

 

 

Revenue backlog(7)

 

10,677,400

11,991,900

 

 

 

 

Cash and cash equivalents

 

1,055,484

1,581,834

Reconciliation of IFRS Net Income as Reported to Adjusted Net Income
 

Net income (loss), as reported

Net charges related to the restructuring & right-sizing plan and other

Acquisition of Kentz

One-time net foreign exchange gain

Net loss (gain) on capital investment and E&C business disposals

Net income, adjusted

     

Acquisition-related costs and integration costs

Amortization of intangible assets

     

 

Fourth Quarter 2016
In M$

E&C

(38.4)

53.91

0.2

13.2

44.6

73.5

Capital

40.0

2.6

42.6

 

1.6

53.9

0.2

13.2

47.2

116.1

 

Per Diluted share ($)

E&C

(0.26)

0.36

0.00

0.09

0.30

0.49

Capital

0.27

0.01

0.28

 

0.01

0.36

0.00

0.09

0.31

0.77

 

Year Ended December 31, 2016
In M$

E&C

46.3

77.62

3.4

54.5

44.6

226.4

Capital

209.2

(48.5)

160.7

 

255.5

77.6

3.4

54.5

(3.9)

387.1

 

Per diluted share ($)

E&C

0.31

0.52

0.02

0.36

0.30

1.51

Capital

1.39

(0.32)

1.07

 

1.70

0.52

0.02

0.36

(0.02)

2.58

1 This amount includes a reversal of $8.5 million ($8.0 million after taxes) of charges, which did not meet the restructuring costs definition in accordance with IFRS. 

2 This amount includes a net reversal of $4.2 million ($6.0 million after taxes) of charges, which did not meet the restructuring costs definition in accordance with IFRS. 

 

Net income  as reported

Net charges related to the restructuring & right-sizing plan and other

Acquisition of Kentz

One-time net foreign exchange gain

Net gain on Capital investment disposals

Net income, adjusted

     

Acquisition-related costs and integration costs

Amortization of intangible assets

     

 

Fourth Quarter 2015
In M$

E&C

13.9

34.81

0.1

17.3

66.1

Capital

35.3

35.3

 

49.2

34.8

0.1

17.3

101.4

 

Per Diluted share ($)

E&C

0.09

0.23

0.00

0.12

0.44

Capital

0.24

0.24

 

0.33

0.23

0.00

0.12

0.68

 

Year Ended December 31, 2015
In M$

E&C

95.8

51.41

15.2

72.0

(32.6)

201.8

Capital

308.5

(145.7)

162.8

 

404.3

51.4

15.2

72.0

(32.6)

(145.7)

364.6

 

Per diluted share ($)

E&C

0.64

0.33

0.10

0.48

(0.21)

1.34

Capital

2.04

(0.96)

1.08

 

2.68

0.33

0.10

0.48

(0.21)

(0.96)

2.42

1 An expense related to the restructuring and right-sizing plan of $36.3 million ($36.3 million after taxes) originally included in the 2014 gross margin, in accordance with IFRS, was reversed in the fourth quarter of 2015 due to a favorable outcome. 

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