AECON GROUP INC. (TSX:ARE) INVESTOR PRESENTATION THIRD QUARTER 2018

Transcription

1 AECON GROUP INC. (TSX:ARE) INVESTOR PRESENTATION THIRD QUARTER 2018

2 Forward-Looking Information The information in this presentation includes certain forward-looking statements. Although these forward-looking statements are based on currently available competitive, financial and economic data and operating plans, they are subject to risks and uncertainties. In addition to events beyond Aecon s control, there are factors which could cause actual or future results, performance or achievements to differ materially from those expressed or inferred herein including risks associated with an investment in the common shares of Aecon and the risks related to Aecon's business, including, but not limited to, the timing of projects, unanticipated costs and expenses, general market and industry conditions and operational and reputational risks, including Large Project Risk and Contractual Factors. Risk factors are discussed in greater detail in the section on Risk Factors included in the Company s Short Form Prospectus dated September 19, 2018, which is available through SEDAR at Forward-looking statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, ongoing objectives, strategies and outlook for Aecon. Forward-looking statements may in some cases be identified by words such as will, plans, believes, expects, anticipates, estimates, projects, intends, should or the negative of these terms, or similar expressions. Other important factors, in addition to those discussed in this document, could affect the future results of Aecon and could cause its results to differ materially from those expressed in any forward-looking statements. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Aecon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

3 Resilient Business Model with Three Diverse Segments INFRASTRUCTURE INDUSTRIAL^ CONCESSIONS 37%* 57%* 6%* Rail & Transit Roads, Bridges & Tunnels Hydroelectric Water Treatment Airports Asphalt & Aggregates Major Projects West 14% Transportation West 14% Industrial West 22% Nuclear Gas Pipelines & Stations Power Generation & Renewables Utilities Programs Oil Development & Pipelines Fabrication & Modules Processing Facilities Utilities 39% Project Development Public-Private Partnerships Project Finance Project Management Operations & Maintenance Bermuda Airport Waterloo LRT Eglinton LRT Major Projects East 45% Transportation East 27% Industrial East 15% Nuclear 24% Finch West LRT Gordie Howe International Bridge ^ On October 3 rd, Aecon entered into a definitive asset purchase agreement to sell substantially all of the assets related to its Contract Mining business, which is included in the Industrial Segment. * % of Q Trailing Twelve Months Revenue

4 Record Backlog with Growing Recurring Revenue * Recurring Revenue is not included in backlog and is, therefore, revenue over and above work to be performed from contracts in backlog

5 Record Backlog & Robust Pipeline of Opportunities $ x 2.3x 2.5x $7.0 $ x 2.0x Annacis Island WWTP Outfall BC Metrolinx Regional Express Rail (RER) Pre-Works West Calgary Ring Road North AB Confederation LRT Phase 2 ON ON $5.0 $4.0 $ x 1.1x 1.3x 1.5x 1.5x 1.0x Keystone XL Pipeline (Canada) AB Highway 401 HOT Lanes ON Trans Mountain Pipeline AB/BC Hamilton LRT ON $2.0 $ x 0.5x Highway 91/17 (Sunbury Interchange) BC RER Electrification ON $ Q1 18 Q2 18 Q3 18 Backlog ($ Bn) Backlog/TTM Revenue 0.0x Pattullo Bridge Replacement BC Bell Fibre to the Home ON Calgary Green Line LRT AB Trudeau Airport Expansion QC Five-year average Backlog/TTM Revenue Reported backlog at Q was $7.0 billion Q backlog represented 2.3x Q TTM revenue (five year average of 1.3x) Continue to see a robust pipeline of opportunities Diversified series of pursuits by sector and geography * Total project size, not necessarily Aecon s share, as most major projects bid with partners

6 Major Concessions Long-Term Projects & Concessions Provide Stability Project Timeline (starting from end of Q3 2018) Sep-2018 Sep-2023 Sep-2028 Sep-2033 Sep-2038 Sep-2043 Sep-2048 Sep-2053 Waterloo LRT Construction completed in 2017; equity stake and 30 year concession post construction Eglinton LRT Construction started in 2015, targeting completion in 2021; equity stake and 30 year maintenance contract post construction Bermuda Airport Construction started in 2017, targeting completion in 2020; 100% equity stake and 30 year operations and maintenance concession began in March 2017 Finch West LRT Gordie Howe Bridge Construction started in 2018, targeting completion in 2023; equity stake and 30 year maintenance contract post construction Construction started in 2018, targeting completion in 2024; equity stake and 30 year operations and maintenance contract post construction Darlington Refurbishment Construction started in 2016, targeting completion in 2026 REM Montreal Construction started in 2018, targeting completion in 2022 Site C Bruce Power Construction started in 2018, targeting completion in 2023 Aecon awarded first of six units for fuel channel and feeder replacement in June 2018; construction to begin in 2020 and be completed by 2022; Aecon consortium has a Preferred Supplier Agreement with Bruce Power which could see award of similar contracts for subsequent five units; ten to twelve year total project duration. Aecon JV was also awarded first of six steam generator unit replacements in December 2017 Construction Equity and Maintenance Equity, Operations and Maintenance Opportunity Dates above are general estimates for completion and may not reflect final completion date

7 Valuable Contribution from Bermuda Concession 30 Year Concession to redevelop, operate and maintain the existing and redeveloped L.F. Wade International Airport in Bermuda US$274M construction budget started in March 2017 and targeting completion in 2020 Growing passenger traffic increased by tourism activity due to targeted marketing campaign and strength in the U.S. economy Air Visitors (Leisure, Business and Other) Total Arriving Passengers (Visitors and Domestic) Air Capacity (Total Seats) August 2018 Traffic Statistics Aug 16 YTD Aug 17 YTD 141, , , % Air Visitor Quarterly Statistics (2015 to 2018) Aug 18 YTD % Change 18 vs , , , % 326, , , % Source: Bermuda Tourism Authority Seasonally strongest contribution in Q2 and Q3 $2.15/share* analyst average contribution to one year target price - assumptions considered by Aecon to be conservative 32,233 36,752 40,325 75,730 87,351 92,039 86,948 90,306 97,138 ^ 42,387 49,547 55,152 Q1 16 Q1 17 Q1 18 Q2 16 Q2 17 Q2 18 Q3 16 Q3 17 Q3E 18 Q4 15 Q4 16 Q4 17 Source: Bermuda Tourism Authority * Sourced from FactSet data for 6 analysts who disclose their expected per share contribution from Bermuda ^ Based on July and August actuals and September estimates

8 Q Financial Results - Reported $ Millions (except EPS, $ per share) Three Months Ended Sep 30* Trailing Twelve Months Ended Sep 30* Change Change + Revenue 1, % 3,003 2,966 1% Gross Profit % % Gross Margin % 12.3% 13.1% 80bps 11.6% 10.9% 70bps Adjusted EBITDA %^ Adjusted EBITDA Margin % 8.8% 7.7% 110bps^ Operating Profit %^ Profit %^ EPS (Diluted) $0.60 $ %^ %^ 6.4% 5.5% 90bps^ %^ %^ $0.83 $ %^ New Awards 1, % 5,688 2, % Backlog 7,005 4,319 62% 7,005 4,319 62% * Reported results impacted by one-time expenses incurred during the periods of Q3 2017, Q TTM and Q TTM including: (1) Net expense of $1.0M related to the departure of the former CEO and insurance recoveries related to Alberta wildfires recorded in MG&A in Q4 2016; (2) Severance expense of $6.8M recorded in MG&A in Q1 2017; (3) Q restructuring expense of $2.9M recorded in MG&A; (4) Q severance expense of $4.1M recorded in MG&A and costs of $4.1M related to activities pursuant to the strategic process to explore a potential sale of the Company; (5) Q severance and restructuring costs of $2.4M and $4.7M of expenses incurred as a result of the strategic sale process and associated Arrangement; (6) Q severance costs of $1.7M and $2.4M of expenses incurred as a result of the strategic sale process and associated Arrangement; and (7) Q severance costs of $1.5M and $0.8M of expenses incurred as a result of the strategic sale process and associated Arrangement. See slide 12 for Q Financial Results Adjusted for impact on results ^ See note above and slides 12 and 13 for impact of one-time adjustments on results + bps = basis point

9 Balance Sheet & Capital Structure BALANCE SHEET ($M) DEBT TO ADJUSTED EBITDA *^+ Sep 30, 2018 Cash^ Working Capital x 2.5x 2.0x 2.7x 1.9x 2.0x 2.0x 2.0x 2.3x** Long-Term Debt - Finance Leases Equipment & Other Asset Loans 46.3 LT Debt excluding Convertible Debentures x 1.0x 0.5x 0.0x 1.2x 1.0x 0.9x 0.9x 0.5x 0.6x 0.3x 0.1x Q TTM Convertible Debentures (Face Value) - Due December 2018 (5.5%) Due December 2023 (5.0%) Total Convertible Debentures x -1.0x -1.5x LT Debt to Adj. EBITDA (excl. Converts) -1.3x LT Debt to Adj. EBITDA (incl. Converts) Net Debt to Adj. EBITDA Total LT Debt plus Convertible Debentures^ LT Debt to Q TTM Adjusted EBITDA *^ - Excluding Convertible Debentures - Including Convertible Debentures** Net Debt to Q TTM Adjusted EBITDA x 2.3 x (1.3) x *Calculations based on face value of convertible debentures ^Excludes non-recourse project debt and restricted cash associated with Bermuda Airport redevelopment project + Net debt calculated as cash less bank indebtedness and long-term debt (including convertible debentures) **Includes $160M of convertible debentures issued in September 2018 prior to overallotment issue of $24M and redemption of $169M of maturing convertible debentures in October 2018

10 Outlook Revenue and Adjusted EBITDA Growth Expected through 2019 and Beyond $7.0 billion backlog at Sep 30, 2018 with a robust pipeline of opportunities ahead Subsequent to quarter end, Coastal GasLink Pipeline project ($526 million) was awarded to a 50/50 Aecon JV Infrastructure bidding activity continues to be robust, which will drive further growth in this segment Significant long-term growth opportunity for Aecon in nuclear work, while capabilities in servicing utility clients continues to be a strength that should lead to growth from the increased demand for utility services, pipelines and power work Oil and commodity prices are improving, but have not reached a level to support a pick up in significant new oil and mining construction projects Mainline pipeline activity expected to contribute to backlog and revenue growth in 2019 Concessions drives value through internal partnerships and from equity concessionaire role on Waterloo LRT, Eglinton LRT, Finch West LRT, Bermuda International Airport Redevelopment and Gordie Howe International Bridge projects Improvement in Adjusted EBITDA Margin Current backlog coupled with a robust pipeline of future opportunities is expected to support the goals of revenue growth and improving Adjusted EBITDA margin All three segments continue to bid on opportunities that support continued Adjusted EBITDA margin improvement

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12 Q Financial Results Adjusted $ Millions (except EPS, $ per share) Three Months Ended Sep 30* Trailing Twelve Months Ended Sep 30* Change Change + Revenue 1, % 3,003 2,966 1% Gross Profit % % Gross Margin % 12.3% 13.1% 80bps 11.6% 10.9% 70bps Adjusted EBITDA % % Adjusted EBITDA Margin % 8.8% 8.8% - 6.9% 6.1% 80bps Operating Profit % % Profit % % EPS (Diluted) $0.60 $ % $0.98 $ % * Adjusted results presented with adjustments for one-time expenses incurred during the periods of Q2 2017, Q2 2018, Q TTM and Q TTM including: (1) Net expense of $1.0M related to the departure of the former CEO and insurance recoveries related to Alberta wildfires recorded in MG&A in Q4 2016; (2) Severance expense of $6.8M recorded in MG&A in Q1 2017; (3) Q restructuring expense of $2.9M recorded in MG&A; (4) Q severance expense of $4.1M recorded in MG&A and costs of $4.1M related to activities pursuant to the strategic process to explore a potential sale of the Company; (5) Q severance and restructuring costs of $2.4M and $4.7M of expenses incurred as a result of the strategic sale process and associated Arrangement; (6) Q severance costs of $1.7M and $2.4M of expenses incurred as a result of the strategic sale process and associated Arrangement; and (7) Q severance costs of $1.5M and $0.8M of expenses incurred as a result of the strategic sale process and associated Arrangement. + bps = basis point

13 Q TTM Reconciliation On a pro-forma basis reflecting the adjustments above Q TTM Earnings per share (Diluted) would have increased to $0.98 from $0.83 ^ See notes on slide 12 for detail of one-time adjustments to results

14 Revenue & Adjusted EBITDA Margin by Segment ^ See slide 13 for Q TTM Reconciliation, and notes on slide 12 for detail of one-time adjustments to results * Also includes Concessions and inter segment eliminations

15 Infrastructure Q Results Revenue ($M) $ % $312 Q3 17 Q3 18 Adj. EBITDA ($M) THIRD QUARTER* Revenue up by $128M, or 41%, year-over-year $65M in major projects east due to increased activity on light rail transit projects and the Bermuda Airport project $40M in major projects west from hydroelectric and waste water $22M in transportation from increased roadbuilding activity in both Western and Eastern Canada TRAILING TWELVE MONTHS* Revenue ($M) +20% $1,173 $979 Q3 17 TTM Q3 18 TTM Adj. EBITDA ($M) +46% Adjusted EBITDA up by $10M, or 46%, year-over-year +29% $59 $23 $33 $7M in major projects from higher volume $46 $3M in transportation from higher volume Q3 17 Q3 18 (7.3% margin) (7.5% margin) New Awards ($M) +224% $1,156 $357 New awards up $799M, or 224%, year-over-year $685M Gordie Howe International Bridge $248M Gardiner Expressway Rehabilitation Q3 17 TTM Q3 18 TTM (4.7% margin) (5.1% margin) New Awards ($M) $3, % $1,185 Q3 17 Q3 18 Q3 17 TTM * Totals and variances may not add due to rounding and eliminations Q3 18 TTM

16 Industrial Q Results Revenue ($M) $ % $437 Q3 17 Q3 18 Adj. EBITDA ($M) +44% $43 $30 THIRD QUARTER* Revenue up by $129M, or 30%, year-over-year $90M in contract mining and field construction projects in Western Canada $63M in utilities due to increased gas and electricity distribution activity in eastern Canada and pipeline projects in Western Canada $24M in nuclear operations Adjusted EBITDA up by $13M, or 44%, year-over-year $8M in conventional industrial from higher volume offsetting lower margin in contract mining $5M in utilities from higher volume TRAILING TWELVE MONTHS* Revenue ($M) -9% $1,974 $1,797 Q3 17 TTM Q3 18 TTM Adj. EBITDA ($M) $127-10% $114 Q3 17 Q3 18 (6.9% margin) (7.6% margin) New Awards ($M) +18% $410 $348 New awards up by $62M, or 18%, year-over-year $39M in nuclear operations $31M in industrial operations Q3 17 TTM Q3 18 TTM (6.4% margin) (6.3% margin) New Awards ($M) +24% $1,538 $1,909 Q3 17 Q3 18 Q3 17 TTM Q3 18 TTM

17 Concessions Q Results Revenue up by $38M period-over-period Higher construction activities from Bermuda International Airport Redevelopment Project $43M of construction revenue related to Bermuda is eliminated on consolidation in the quarter Adjusted EBITDA up $4.4M period-over-period Increase driven primarily by increased activity from Bermuda International Airport Redevelopment Project operations

18 Cash Position FREE CASH FLOW ($M) Q TTM Y/E 2017 Adjusted EBITDA Cash Interest Expense (net) (40.6) (22.7) Capital Expenditures (net) (28.7) (32.6) Income Taxes (Paid)/Recovered (2.7) (5.6) Net JV Impact* (15.6) (13.3) Free Cash Flow Before W/C Change in Working Capital Free Cash Flow before one-time items Sale process and severance (13.5) (16.1) KEY DRIVERS FOR FREE CASH FLOW MOMENTUM Working capital improvement in 2018 TTM due to significant advance payments on a number of new major projects Cash interest up due to interest expense on nonrecourse project debt for Bermuda International Airport Redevelopment Project Capital expenditures expected to remain consistent with prior periods No significant cash flow one-offs forecasted in the next twelve months FREE CASH FLOW *Net JV Impact represents the difference between Equity Project EBITDA included in Adjusted EBITDA (Equity Project EBITDA as defined in Aecon s MD&A) and distributions from projects accounted for using the equity method 18

19 Capital Markets Overview Price as of November 13, 2018 Shares Outstanding Avg. Daily Share Volume (3 months TSX & ATS) Dividend Yield Market Capitalization 52 Week Low / High $ Million 0.7 Million ($12 Million) 2.6%* ~$1.2 Billion $14.27 / $20.06 ANALYST COVERAGE Firm Analyst Telephone AltaCorp Capital Chris Murray (647) Canaccord Genuity Yuri Lynk (514) CIBC Capital Markets Jacob Bout (416) Desjardins Securities Benoit Poirier (514) GMP Securities Ben Jekic (416) Industrial Alliance Securities Neil Linsdell (514) National Bank Financial Maxim Sytchev (416) Paradigm Capital Corey Hammill (416) Raymond James Frederic Bastien (604) $0.28 ANNUAL DIVIDEND HISTORY $0.50 $0.50 $0.46 $0.40 $0.36 $0.32 RBC Capital Markets Derek Spronck (416) TD Securities Michael Tupholme (416) Buy / Outperform $22.05 One Year 1 Hold / Neutral Avg. Target Price * Based on $0.50 Annual Dividend announced March 6, 2018

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