Investors

Quarterly Reports

Q2 - 2017 Financial Highlights

Q2   
2017
Q2   
2016
$
change
%
change
Revenues 1,935 2,103 -168 -8%
Gross margin 302 341 -39 -11%
Net income attributable to shareholders, adjusted 108 107 1 1%
Net income attributable to
SNC-Lavalin's shareholders, as reported
136 89 47 53%
Basic earnings per share ($) 0.91 0.59 0.32 54%
Diluted earnings per share ($) 0.91 0.59 0.32 54%
(in millions of CA$, except per share amounts)

Press Releases

Montreal August 3, 2017

  • Reported Q2 2017 IFRS net income attributable to SNC-Lavalin shareholders of $136.4 million, or $0.91 per diluted share.
  • Q2 2017 adjusted net income from E&C(1) of $64.2 million, or $0.43 per diluted share.
  • Q2 2017 G&A expenses of $132.3 million, 12.3% lower versus Q2 2016.
  • Revised 2017 Outlook: adjusted diluted EPS from E&C(2) in the range of $2.00 to $2.20. This outlook includes six months of Atkins operations and is based on an increased weighted average number of diluted outstanding shares of approximately 163 million (151 million pre equity issuance).

SNC-Lavalin Group Inc. (TSX:SNC) today announces its results for the second quarter ended June 30, 2017.

"We continued to deliver on our growth and capital allocation strategy by recently completing three important transactions: the transformative acquisition of Atkins, one of the world's most respected consultancies in design, engineering and project management; the creation of a new infrastructure investment vehicle; and unlocking the real estate value of our head office through a sale-leaseback agreement. Concurrently, we also delivered another good quarter, with good performances from our Power and Infrastructure sectors and our Capital group," said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. "With the strength of our balance sheet and diversified revenue backlog, as well as our diversified business model, we are confident that we can meet our growth ambitions of establishing SNC-Lavalin in the top three in our industry globally."

  • Q2 2017 reported IFRS net income attributable to SNC-Lavalin shareholders was $136.4 million, or $0.91 per diluted share, compared with $88.5 million, or $0.59 per diluted share, for the corresponding period in 2016. Q2 2017 reported IFRS net income attributable to SNC-Lavalin shareholders included a net gain after taxes of $101.5 million, or $0.67 per diluted share, on the disposal of SNC-Lavalin's Montreal head office building and an adjacent lot of land.

  • Adjusted net income from E&C(1) for Q2 2017 was $64.2 million, or $0.43 per diluted share, compared to $71.4 million, or $0.48 per diluted share for Q2 2016, mainly due to a lower Segment EBIT(5), partially offset by an income taxes benefit and a decrease in corporate SG&A expenses. On a segmented basis, Power and Infrastructure delivered higher Segment EBIT(5) in Q2 2017, compared to Q2 2016, while the Oil & Gas and Mining & Metallurgy Segment EBIT(5) was lower.

  • Selling, general and administrative (SG&A) expenses in Q2 2017 were $185.3 million compared with $201.1 million, in Q2 2016. General and administrative (G&A) expenses decreased by 12.3% to $132.3 million, while selling expenses increased to $53.0 million compared to $50.2 million in Q2 2016. This increase was mainly due to higher business development activities than in Q2 2016, particularly in the Infrastructure sector in Canada.

  • Adjusted net income from Capital(3) for Q2 2017 was $43.6 million, or $0.29 per diluted share, compared with $35.6 million, or $0.24 per diluted share for the corresponding period in 2016, mainly due to a higher level of activity of Capital investments and an increase in dividends from Highway 407 ETR.

  • Total E&C revenue for the second quarter ended June 30, 2017 was $1.9 billion, compared with $2.0 billion in the second quarter of 2016. The variation was due to a decrease in the Oil & Gas, Power and Infrastructure segments, partially offset by an increase in the Mining & Metallurgy segment. The decrease in Oil & Gas was mainly due to the completion or near completion of major projects in the LNG sector, partly offset by higher revenues from projects in the Middle East. The decrease in Power was mainly due to a decrease in Thermal Power and Transmission & Distribution sub-segments, partially offset by an increase in Nuclear. The decrease in Infrastructure is principally attributable to the disposal, in December 2016, of SNC-Lavalin's non-core E&C business in France and Real Estate Facilities Management business in Canada.

  • The revenue backlog(7) totaled $9.6 billion at the end of June 2017. New contract awards for the second quarter amounted to $1.4 billion, totaling $2.6 billion for the six-month period ended June 30, 2017. It should be noted that the June revenue backlog amount does not include Atkins revenue backlog, as the acquisition was completed on July 3, 2017. Also, as the backlog methodology is calculated differently in each company, particularly due to Atkins book and burn business model, SNC-Lavalin's management is currently evaluating and reviewing its backlog reporting policy.

  • Cash and cash equivalents as at June 30, 2017, was $0.7 billion, compared to $0.8 billion at the end of March 31, 2017.

2017 Outlook Update

The Company is revising its previously announced 2017 outlook range for its adjusted diluted EPS from E&C(2) to $2.00 to $2.20 from $1.70 to $2.00 (This range would have reduced to a comparative $1.57 to $1.85 on a like for like weighted average number of outstanding diluted shares basis). The revision is mainly due to the completion of the acquisition of Atkins on July 3, 2017 and related financing; the outlook now includes approximately six months of Atkins operations. It also assumes a weighted average number of outstanding diluted shares of approximately 163 million (151 million pre equity issuance).

While we anticipate continuing market challenges in 2017 in certain of the Company's sectors, we expect to benefit from our 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. Note that for the balance of 2017, Atkins will be reported as a fifth E&C segment within the segment disclosure note to the financial statements.

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 Company's prospectus dated April 24, 2017, and 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.

Change to the Board of Directors

Following comprehensive board succession planning by the Governance & Ethics Committee in 2017, the Board appointed the Honorable Kevin G. Lynch as Vice-Chairman with the expectations that Dr. Lynch will replace the current Chairman of the Board, Mr. Larry Stevenson, upon his planned retirement from the Board on December 31, 2017.

Quarterly Dividend

The Board of Directors today declared a cash dividend of $0.273 per share, payable on August 31, 2017, to shareholders of record on August 17, 2017. This dividend is an "eligible dividend" for income tax purposes.

Q2 2017 Results Conference Call / Webcast

SNC-Lavalin will hold a conference call today at 3:00 p.m. EDT (Eastern Daylight Time) to review results for its second quarter. To join the conference call, please dial toll free at 1 800 263 0877 in North America, 647 794 1827 in Toronto, 438 968 3557 in Montreal, 080 0358 6377 in the United Kingdom, or 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.

Analyst and Investor Day

The Company is pleased to announce that an investor and analyst day will take place at La Maison Symphonique in Montreal on September 12, 2017. SNC-Lavalin's Executive Leadership Team will take this opportunity to discuss the Company's long-term vision, strategy, most recent Atkins acquisition, as well as the Company's business activities and fundamentals. The event details will soon be posted on SNC-Lavalin's website. Note that the event will be webcasted.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is a global fully integrated professional services and project management company and a major player in the ownership of infrastructure. From offices around the world, SNC-Lavalin's employees are proud to build what matters. Our teams provide comprehensive end-to-end project solutions - including capital investment, consulting, design, engineering, construction, sustaining capital and operations and maintenance - to clients in oil and gas, mining and metallurgy, infrastructure and power. www.snclavalin.com


(1) Adjusted net income from E&C is defined as net income attributable to SNC-Lavalin shareholders from E&C, excluding charges related to restructuring, right-sizing and other, acquisition-related costs and integration costs, as well as amortization of intangible assets related to Kentz acquisition, and the gains (losses) on disposals of E&C businesses and the head office building. 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 diluted 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 diluted weighted average number of outstanding shares for the period.

(5) Segment EBIT consist of 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. Expenses that are not allocated to the Company's segment include: 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, Capital investments and head office building. 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 charges related to restructuring, right-sizing and other, acquisition-related costs and integration costs, as well as the gains (losses) on disposals of E&C businesses, Capital investments and head office building. 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. Management could be required to make estimates regarding the revenue to be generated for long-term firm reimbursable contracts. 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) Second Quarter Six months ended June 30
  2017 2016 2017 2016
         
Revenues        
From E&C 1,868,161 2,045,237 3,656,485 3,976,010
From Capital 66,712 57,749 127,658 115,146
  1,934,873 2,102,986 3,784,143 4,091,156
         
Net income attributable to SNC-Lavalin's shareholders
From E&C 
    87,356     52,894     132,693     84,093
From Capital 49,034 35,616 93,410 126,524
  136,390 88,510 226,103 210,617
         
Diluted EPS ($)
From E&C 
From Capital
  0.58
0.33
  0.35
0.24
  0.88
0.62
  0.56
0.84
  0.91 0.59 1.50 1.40
         
         
Adjusted net income attributable to SNC-Lavalin's shareholders
From E&C(1)
From Capital(3)
      64,160
43,632
      71,400
35,616
      124,884
88,007
      128,578
75,479
  107,792 107,016 212,891 204,057
         
Adjusted diluted EPS ($)
From E&C(2)
From Capital(4)
  0.43
0.29
  0.48
0.24
  0.83
0.59
  0.86
0.50
  0.72 0.72 1.42 1.36
Adjusted E&C EBITDA(6)
Adjusted E&C EBITDA margin
  86,849
4.6%
  117,916
5.8%
  186,840
5.1%
  217,766
5.5%
         
         
Revenue backlog(7)     9,576,600 12,544,300
         
Cash and cash equivalents     737,361 1,064,589

 

Reconciliation of IFRS Net Income as Reported to Adjusted Net Income

 

Net income, as reported

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

Acquisition

Net gain on  disposals of E&C business, head office building, and Capital investment

Net income,  adjusted

     

Acquisition-related costs and integration costs

Amortization of intangible assets related to Kentz

   

 

Second Quarter 2017
In M$

E&C

87.4

22.6*

44.5

11.5

(101.8)

64.2

Capital

49.0

-

-

-

(5.4)

43.6

 

136.4

22.6

44.5

11.5

(107.2)

107.8

  Per Diluted share ($)
E&C

0.58

0.15

0.30

0.08

(0.68)

0.43

Capital

0.33

-

-

-

(0.04)

0.29

 

0.91

0.15

0.30

0.08

(0.72)

0.72

 

Six Months Ended June 30, 2017
In M$

E&C

132.7

25.2

45.6

23.8

(102.4)

124.9

Capital

93.4

-

-

-

(5.4)

88.0

 

226.1

25.2

45.6

23.8

(107.8)

212.9

  Per Diluted share ($)
E&C

0.88

0.17

0.31

0.16

(0.68)

0.83

Capital

0.62

-

-

-

(0.04)

0.59

 

1.50

0.17

0.31

0.16

(0.72)

1.42

*This amount includes $4.0 million ($5.0 million after taxes) of net 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

Net gain on Capital investment disposals

Net income, adjusted

     

Acquisition-related costs and integration costs

Amortization of intangible assets related to Kentz

   

 

Second Quarter 2016
In M$

E&C

52.9

4.51

1.4

12.6

-

71.4

Capital

35.6

-

-

-

-

35.6

 

88.5

4.5

1.4

12.6

-

107.0

  Per Diluted share ($)
E&C

0.35

0.03

0.01

0.09

-

0.48

Capital

0.24

-

-

-

-

0.24

 

0.59

0.03

0.01

0.09

-

0.72

 

Six Months Ended June 30, 2016
In M$

E&C

  84.1

13.8

2.3

28.4

-

128.6

Capital

126.5

-

-

-

(51.1)

75.4

 

210.6

13.8

2.3

28.4

(51.1)

204.0

  Per Diluted share ($)
E&C

0.56

0.09

0.02

0.19

-

0.86

Capital

0.84

-

-

-

(0.34)

0.50

 

1.40

0.09

0.02

0.19

(0.34)

1.36

1This amount includes $4.3 million ($2.0 million after taxes) of net charges which did not meet the restructuring costs definition in accordance with IFRS.


Forward-looking Statements:

Reference in this press release, and hereafter, to the "Company" or to "SNC-Lavalin" means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements.

Statements made in this press release that describe the Company's or management's budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be "forward-looking statements", which can be identified by the use of the conditional or forward-looking terminology such as "aims", "anticipates", "assumes", "believes", "cost savings", "estimates", "expects", "goal", "intends", "may", "plans", "projects", "should", "synergies", "will", or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses and future prospects; and ii) business and management strategies and the expansion and growth of the Company's operations. All such forward-looking statements are made pursuant to the "safe-harbour" provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

The 2017 outlook referred to in this press release is forward-looking information and is based on the methodology described in the Company's 2016 Management's Discussion and Analysis ("MD&A") under the heading "How We Budget and Forecast Our Results" and is subject to the risks and uncertainties described in the Company's public disclosure documents. The purpose of the 2017 outlook is to provide the reader with an indication of management's expectations, at the date of this press release, regarding the Company's future financial performance and readers are cautioned that this information may not be appropriate for other purposes.

Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company's 2016 MD&A, particularly in the sections entitled "Critical Accounting Judgments and Key Sources of Estimation Uncertainty" and "How We Analyze and Report our Results" in the Company's 2016 MD&A, and as updated in the first and second quarter 2017 MD&A and the Company's prospectus dated April 24, 2017. The 2017 outlook also assumes that the federal charges laid against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. on February 19, 2015, will not have a significant adverse impact on the Company's business in 2017. If these assumptions are inaccurate, the Company's actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company's assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to: (a) the outcome of pending and future claims and litigation could have a material adverse impact on the Company's business, financial condition and results of operation; (b) on February 19, 2015, the Company was charged with one count of corruption under the Corruption of Foreign Public Officials Act (Canada)(the "CFPOA") and one count of fraud under the Criminal Code (Canada), and is also subject to other ongoing investigations which could subject the Company to criminal and administrative enforcement actions, civil actions and sanctions, fines and other penalties, some of which may be significant. These charges and investigations, and potential results thereof, could harm the Company's reputation, result in suspension, prohibition or debarment of the Company from participating in certain projects, reduce its revenues and net income and adversely affect its business; (c) further regulatory developments could have a significant adverse impact on the Company's results, and employee, agent or partner misconduct or failure to comply with anti-bribery and other government laws and regulations could harm the Company's reputation, reduce its revenues and net income, and subject the Company to criminal and administrative enforcement actions and civil actions; (d) if the Company is not able to successfully execute on its strategic plan, its business and results of operations would be adversely affected; (e) a negative impact on the Company's public image could influence its ability to obtain future projects; (f) fixed-price contracts or the Company's failure to meet contractual schedule or performance requirements or to execute projects efficiently may increase the volatility and unpredictability of its revenue and profitability; (g) the Company's revenue and profitability are largely dependent on the awarding of new contracts, which it does not directly control, and the uncertainty of contract award timing could have an adverse effect on the Company's ability to match its workforce size with its contract needs; (h) the Company's backlog is subject to unexpected adjustments and cancellations, including under "termination for convenience" provisions, and does not represent a guarantee of the Company's future revenues or profitability; (i) SNC-Lavalin is a provider of services to government agencies and is exposed to risks associated with government contracting; (j) the Company's international operations are exposed to various risks and uncertainties, including unfavourable political environments, weak foreign economies and the exposure to foreign currency risk; (k) there are risks associated with the Company's ownership interests in Capital investments that could adversely affect it; (l) the Company is dependent on third parties to complete many of its contracts; (m) the Company's use of joint ventures and partnerships exposes it to risks and uncertainties, many of which are outside of the Company's control; (n) the competitive nature of the markets in which the Company does business could adversely affect it; (o) the Company's project execution activities may result in professional liability or liability for faulty services; (p) the Company could be subject to monetary damages and penalties in connection with professional and engineering reports and opinions that it provides; (q) the Company may not have in place sufficient insurance coverage to satisfy its needs; (r) the Company's employees work on projects that are inherently dangerous and a failure to maintain a safe work site could result in significant losses and/or an inability to obtain future projects; (s) the Company's failure to attract and retain qualified personnel could have an adverse effect on its activities; (t) work stoppages, union negotiations and other labour matters could adversely affect the Company; (u) the Company relies on information systems and data in its operations. Failure in the availability or security of the Company's information systems or in data security could adversely affect its business and results of operations; (v) any acquisition or other investment may present risks or uncertainties; (w) divestitures and the sale of significant assets may present risks or uncertainties; (x) a deterioration or weakening of the Company's financial position, including its cash net of recourse debt, would have a material adverse effect on its business and results of operations; (y) the Company may have significant working capital requirements, which if unfunded could negatively impact its business, financial condition and cash flows; (z) an inability of SNC-Lavalin's clients to fulfill their obligations on a timely basis could adversely affect the Company; (aa) the Company may be required to impair certain of its goodwill, and it may also be required to write down or write off the value of certain of its assets and investments, either of which could have a material adverse impact on the Company's results of operations and financial condition; (bb) global economic conditions could affect the Company's client base, partners, subcontractors and suppliers and could materially affect its backlog, revenues, net income and ability to secure and maintain financing; (cc) fluctuations in commodity prices may affect clients' investment decisions and therefore subject the Company to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards, and may affect the costs of the Company's projects; (dd) inherent limitations to the Company's control framework could result in a material misstatement of financial information; (ee) environmental laws and regulations expose the Company to certain risks, could increase costs and liabilities and impact demand for the Company's services; as well as the risks related to the Company's acquisition of WS Atkins plc ("Atkins") identified in Section 11 of the Company's second quarter 2017 MD&A (entitled "Risks and Uncertainties"). The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the sections "Risks and Uncertainties", "How We Analyze and Report Our Results" and "Critical Accounting Judgments and Key Sources of Estimation Uncertainty" in the Company's 2016 MD&A and as updated in the first and second quarter 2017 MD&A and the Company's prospectus dated April 24, 2017.

The forward-looking statements herein reflect the Company's expectations as at the date of this press release and are subject to change after this date. The Company does not undertake to update publicly or to revise any such forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.

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