Mr. Jean-Louis Servranckx reports

AECON REPORTS THIRD QUARTER 2023 RESULTS

Aecon Group Inc. has released results for the third quarter of 2023.

"With backlog of $6.2 billion and recurring revenue programs continuing to see robust demand, we believe we are well positioned to achieve further revenue growth over the next few years," said Jean-Louis Servranckx, President and Chief Executive Officer, Aecon Group Inc. "We continue to pursue and reach settlements with our respective clients as we make progress to close out four challenging legacy projects that are undermining positive revenue and profitability trends in the balance of Aecon's business. We remain focused on projects and opportunities procured and delivered under more collaborative models that support long-term margin improvement and predictability and that are linked to decarbonization, sustainability, and the energy transition."

HIGHLIGHTS

All quarterly and YTD financial information contained in this news release is unaudited.

• Revenue for the three months ended September 30, 2023 of $1,240 million was $81 million, or 6%, lower compared to the same period in 2022, primarily due to the impact of the sale of Aecon Transportation East ("ATE") in the second quarter of 2023. ATE contributed revenue of $126 million for the three-months ended September 30, 2022. Adjusting for the sale of ATE, revenue increased on a like-for-like basis by $46 million, or 4%, in the quarter.
• Adjusted EBITDA (1) (2) of $32.0 million for the three months ended September 30, 2023 (Adjusted EBITDA margin (3) of 2.6%) compared to Adjusted EBITDA of $92.6 million (Adjusted EBITDA margin of 7.0%) in the same period in 2022 and operating profit of $140.1 million compared to operating profit of $61.0 million in the same period in 2022.
• Net profit of $133.4 million (diluted earnings per share of $1.63) for the three months ended September 30, 2023 compared to a net profit of $34.5 million (diluted earnings per share of $0.45) during the same period in 2022.
• Four large fixed price legacy projects being performed by joint ventures in which Aecon is a participant (see Section 5 "Recent Developments", Section 10.2 "Contingencies" and Section 13 "Risk Factors" of the Company's September 30, 2023 Management's Discussion and Analysis ("MD&A"), are being negatively impacted due to additional costs for which the joint ventures assert that the owners are contractually responsible, including for, among other things, unforeseeable site conditions, third party delays, impacts of COVID-19, supply chain disruptions, and inflation related to labour and materials. Aecon recognized an operating loss of $91.1 million in the third quarter of 2023 (operating loss of $30.1 million in the same period of 2022) from these four legacy projects. At September 30, 2023, the remaining backlog to be worked off on these projects was $528 million.
• Reported backlog at September 30, 2023 of $6,202 million compared to backlog of $6,275 million at September 30, 2022. New contract awards of $591 million were booked in the third quarter of 2023 compared to $991 million during the same period in 2022.
• On September 20, 2023, Aecon announced the closing of the previously disclosed agreement with Connor, Clark & Lunn Infrastructure ("CC&L Infrastructure") to sell a 49.9% interest in the L.F. Wade International Airport (Bermuda International Airport) concessionaire, Bermuda Skyport Corporation Limited ("Skyport"). The final sale price was $162.3 million (US$120.0 million) in cash following certain closing adjustments. Aecon recorded a gain on sale of $139.0 million, including a fair value remeasurement gain of $80.4 million related to Aecon's 50.1% retained interest in the third quarter.
• Aecon announced that it has achieved Silver Certification in Progressive Aboriginal Relations from the Canadian Council for Aboriginal Business. Aecon was one of the four companies recognized at the silver level. As a silver-certified company, Aecon has demonstrated its Indigenous business plan through its established Indigenous business partnerships, active contributions of Indigenous Peoples across its workplace, and investments in communities and people to support a sustainable future.
• Subsequent to quarter end, on October 23, 2023 Aecon announced a strategic investment by Oaktree Capital Management, L.P. ("Oaktree") in an Aecon subsidiary, Aecon Utilities Group Inc. ("Aecon Utilities"), creating an enhanced growth vehicle focused on providing utility infrastructure services across North America. The investment subsequently closed on October 24, 2023. Oaktree acquired a 27.5% ownership interest by way of a net $150 million convertible preferred equity investment (the "Investment") in Aecon Utilities and based on an enterprise value for Aecon Utilities of $750 million. The Investment creates a vehicle to address attractive industry growth opportunities across utility end-markets in Canada and the U.S., provides financial flexibility to accelerate Aecon Utilities' acquisition strategy, introduces a recognized value-added partner in Oaktree with a successful track record in utilities infrastructure investing, and strengthens Aecon's consolidated balance sheet, providing Aecon the financial flexibility to fund strategic growth initiatives.

Revenue for the three months ended September 30, 2023 of $1,240 million was $81 million, or 6%, lower compared to the third quarter of 2022. In the Construction segment, lower revenue of $83 million was driven by decreases in civil ($106 million) due to the sale of ATE during the second quarter of 2023, nuclear ($11 million), and utilities ($2 million), partially offset by higher revenue in industrial operations ($30 million) and urban transportation solutions ($6 million). In the Concessions segment, higher revenue of $4 million for the three months ended September 30, 2023 was primarily due to the increase in commercial flight operations at the Bermuda International Airport. Intersegment revenue eliminations increased by $2 million due to higher revenue between the Construction and Concessions segments.

Operating profit of $140.1 million for the three months ended September 30, 2023 increased by $79.1 million compared to an operating profit of $61.0 million in the same period in 2022. The improvement in quarter-over-quarter operating profit was largely due to an increase in other income of $134.6 million compared to the same period in 2022. This increase was primarily due to a gain related to the sale of a 49.9% interest in the Bermuda International Airport concessionaire of $139.0 million, including a fair value remeasurement gain of $80.4 million on Aecon's 50.1% retained interest in the concessionaire, partially offset by a $1.5 million reduction in the gain on sale of ATE after certain closing adjustments, lower gains on the sale of equipment ($1.5 million), and a decrease in foreign exchange gains ($1.5 million).

The above increase in operating profit from an increase in other income was partially offset by lower gross profit in the third quarter of 2023 of $72.9 million. In the Construction segment, gross profit decreased by $75.7 million largely as a result of negative gross profit related to four fixed price legacy projects in the quarter of $91.1 million, arising from two of the four projects, one of which was in urban transportation solutions and the other in the civil sector, compared to negative gross profit on the fixed price legacy projects of $30.2 million in the third quarter of 2022. These four fixed price legacy projects are discussed in Section 5 "Recent Developments" and Section 10.2 "Contingencies" in the September 30, 2023 MD&A, and Section 13 "Risk Factors" in the 2022 Annual MD&A. Other than the impact of these fixed price legacy projects in the quarter, lower gross profit in the balance of the Construction segment was largely due to lower gross profit in civil operations primarily due to the sale of ATE in the second quarter of 2023. In the Concessions segment, gross profit increased by $2.7 million, primarily from an improvement in results from airport operations at the Bermuda International Airport.

Marketing, general and administrative expense ("MG&A") for the three months ended September 30, 2023 decreased by $13.8 million compared to the same period in 2022. Lower MG&A in the third quarter of 2023 was primarily due to lower personnel costs and from a decrease due to the sale of ATE in the second quarter of 2023. MG&A as a percentage of revenue for the third quarter decreased from 3.2% in 2022 to 2.3% in 2023.

Reported backlog at September 30, 2023 of $6,202 million compares to backlog of $6,275 million at September 30, 2022. New contract awards of $591 million were booked in the third quarter compared to $991 million in the same periods in 2022.

REPORTING SEGMENTS

Aecon reports its financial performance on the basis of two segments: Construction and Concessions, which are described in the Company's September 30, 2023 MD&A.

CONSTRUCTION SEGMENT

Revenue in the Construction segment for the three months ended September 30, 2023 of $1,215 million was $83 million, or 6%, lower compared to the same period in 2022. Revenue was lower in civil operations ($106 million) driven primarily by a lower volume of roadbuilding construction work in eastern Canada of $127 million as a result of the sale of ATE in the second quarter of 2023, and partially offset by an increase in major projects work in western Canada. Revenue was also lower in nuclear operations ($11 million) from a lower volume of refurbishment work at nuclear generating stations located in Ontario, and in utilities operations ($2 million). Partially offsetting these decreases was higher revenue in industrial operations ($30 million) driven primarily by increased activity on mainline pipeline work which offset a lower volume of field construction work primarily at chemical facilities in eastern Canada, and in urban transportation solutions ($6 million) primarily from an increase in rail expansion and electrification work in Ontario.

Operating profit in the Construction segment of $1.3 million in the three months ended September 30, 2023 compares to an operating profit of $63.4 million in the same period in 2022, a decrease of $62.1 million. This decrease was primarily driven by lower gross profit in civil operations due to negative gross profit of $41.6 million in the third quarter of 2023 from one of the four fixed price legacy projects versus a gross profit of $1.0 million in the same period in 2022 from the same project; in urban transportation solutions by a negative gross profit of $49.5 million from one of the four fixed price legacy projects compared to a negative gross profit of $22.5 million in the same period last year from the same project; and partially offset in industrial operations by gross profit of $nil from one of the four fixed price legacy projects compared to a negative gross profit of $8.7 million in the same period last year from the same project. The four fixed price legacy projects are discussed in Section 5 "Recent Developments" and Section 10.2 "Contingencies" in the September 30, 2023 MD&A, and Section 13 "Risk Factors" in the 2022 Annual MD&A. Other than the impact of these fixed price legacy projects in the quarter, lower operating profit in the balance of the Construction segment was driven by lower operating profit from roadbuilding construction work due to the sale of ATE in the second quarter of 2023, largely offset by higher gross profit margin in nuclear operations and urban transportation solutions and lower MG&A in utilities operations.

Construction backlog at September 30, 2023 was $6,100 million, which was $80 million lower than the same time last year. Backlog decreased period-over-period in civil ($359 million), industrial operations ($280 million), and urban transportation solutions ($256 million), and increased in nuclear ($717 million) and utilities ($98 million). Backlog at September 30, 2023 excludes all amounts related to ATE which was sold in the second quarter of 2023 (see Section 5 "Recent Developments" in the September 30, 2023 MD&A) at which time related backlog of $447 million was removed. New contract awards totaled $563 million in the third quarter of 2023 and $3,348 million year-to-date, compared to $966 million and $3,438 million, respectively, in the same periods last year.

On September 20, 2023, Aecon announced the closing of the previously disclosed agreement with CC&L Infrastructure to sell a 49.9% interest in Skyport. Following this transaction, Aecon holds a 50.1% interest in Skyport, the concessionaire responsible for the Bermuda International Airport's operations, maintenance and commercial functions, and the entity that will manage and coordinate the overall delivery of the Bermuda International Airport Redevelopment Project over a 30-year concession term that commenced in 2017. On December 9, 2020, Skyport opened the new passenger terminal building at the L.F. Wade International Airport. Prior to the transaction with CC&L Infrastructure, Aecon's participation in Skyport was 100% consolidated and, as such, was accounted for in the consolidated financial statements by reflecting, line by line, the assets, liabilities, revenue and expenses of Skyport. Subsequent to the closing of the Skyport transaction during the third quarter of 2023, Aecon's 50.1% concession participation in the Skyport joint venture is accounted for using the equity method. See Section 5 "Recent Developments" in the September 30, 2023 MD&A for details of the completed sale of a 49.9% interest in Skyport. Furthermore, Aecon's concession participation in the Eglinton Crosstown light rail transit ("LRT"), Finch West LRT, Gordie Howe International Bridge, Waterloo LRT, and the GO Expansion On-Corridor Works projects are joint ventures that are also accounted for using the equity method.

For the three months ended September 30, 2023, revenue in the Concessions segment of $26 million was $4 million higher compared to the same period in 2022 primarily due to an increase in commercial flight operations at the Bermuda International Airport.

Operating profit in the Concessions segment for the three months ended September 30, 2023 improved by $144.4 million. Higher operating profit was primarily driven by a gain related to the sale of a 49.9% interest in Skyport of $139.0 million, including a fair value remeasurement gain of $80.4 million on Aecon's 50.1% retained interest in Skyport, an improvement in operating results at the Bermuda International Airport, and from an increase in management and development fees.

Except for Operations & Maintenance ("O&M") activities under contract for the next five years and that can be readily quantified, Aecon does not include in its reported backlog expected revenue from concession agreements. As such, while Aecon expects future revenue from its concession assets, no concession backlog, other than from such O&M activities for the next five years, is reported.

OUTLOOK

Demand for Aecon's services across Canada continues to be strong. During the first nine months of 2023, Aecon was awarded a number of projects that were added to backlog including delivery of the Deerfoot Trail Improvements project in Calgary, Alberta and an Aecon joint venture was awarded the Fuel Channel and Feeder Replacement contract for four units at the Bruce Nuclear Generating Station in Tiverton, Ontario. In addition, during 2022, a consortium in which Aecon is a participant was selected to deliver the long-term GO Expansion On-Corridor Works project in Ontario under a progressive design, build, operate and maintain contract model which begins with a two-year development phase leading into the main construction scope and a 25-year operations and maintenance component, while another consortium in which Aecon is a participant was selected as the development partner for the Scarborough Subway Extension Stations, Rail and Systems project in Ontario to be delivered using a progressive design-build model. None of the anticipated work from these two significant long-term progressive design-build projects is yet reflected in backlog. Aecon (including joint ventures in which Aecon is a participant) is also prequalified on a number of project bids due to be awarded during the next twelve months and has a pipeline of opportunities to further add to backlog over time. With backlog of $6.2 billion at September 30, 2023 and recurring revenue programs continuing to see robust demand, Aecon believes it is positioned to achieve further revenue growth over the next few years.

While volatile global and Canadian economic conditions are impacting inflation, interest rates, and overall supply chain efficiency, these factors have stabilized to some extent and have largely been and will continue to be reflected in the pricing and commercial terms of the Company's recent and prospective project awards and bids. However, certain ongoing joint venture projects that were bid some years ago have experienced impacts related, in part, to those factors, that will require satisfactory resolution of claims with the respective clients. Results have been negatively impacted by these four legacy projects in recent periods, undermining positive revenue and profitability trends in the balance of Aecon's business. Until these projects are complete and related claims have been resolved, there is a risk that this could also occur in future periods - see Section 5 "Recent Developments" and Section 10.2 "Contingencies" in the September 30, 2023 MD&A and Section 13 "Risk Factors" in the 2022 Annual MD&A regarding the risk on four large fixed price legacy projects entered into in 2018 or earlier by joint ventures in which Aecon is a participant.

On May 1, 2023, Aecon announced the closing of the previously disclosed definitive purchase agreement with Green Infrastructure Partners Inc. ("GIP") under which Aecon sold its ATE operations. Net cash proceeds received on closing, net of debt and cash assumed by the purchaser, were $155.3 million. On September 20, 2023, Aecon announced the closing of the previously disclosed agreement with CC&L Infrastructure to sell a 49.9% interest in Skyport. The final sale price was $162.3 million (US$120.0 million) in cash following certain closing adjustments. Aecon plans to maintain a disciplined capital allocation approach focused on long-term shareholder value.

Subsequent to quarter end, on October 23, 2023 Aecon announced a strategic investment by Oaktree in Aecon Utilities. The investment subsequently closed on October 24, 2023. Oaktree acquired a minority ownership interest in Aecon Utilities by way of a net $150 million convertible preferred equity investment. The Investment creates a vehicle to address attractive industry growth opportunities across utility end-markets in Canada and the U.S., provides financial flexibility to accelerate Aecon Utilities' acquisition strategy, introduces a recognized value-added partner in Oaktree with a successful track record in utilities infrastructure investing, and strengthens Aecon's consolidated balance sheet with Aecon receiving proceeds of $150 million from the Investment. This provides Aecon the financial flexibility to fund strategic growth initiatives. In addition to Aecon Utilities' new credit facility of $400 million, Aecon has a separate committed revolving credit facility of $450 million that replaces its prior $600 million facility.

In the Construction segment, with strong demand, growing recurring revenue programs, and diverse backlog in hand, Aecon is focused on achieving solid execution on its projects and selectively adding to backlog through a disciplined bidding approach that supports long-term margin improvement in this segment. In addition to the selection of consortiums in which Aecon is a participant for two large transit related projects in 2022 noted above, in early 2023, a partnership in which Aecon is a participant announced that it had executed a six-year alliance agreement with Ontario Power Generation to deliver North America's first grid-scale Small Modular Reactor through the Darlington New Nuclear Project in Clarington, Ontario. In addition, Oneida LP, a consortium in which Aecon Concessions is an 8.35% equity partner, executed an agreement with the Independent Electricity System Operator for the Oneida Energy Storage Project to deliver a 250 megawatt / 1,000 megawatt-hour energy storage facility near Nanticoke Ontario, with Aecon awarded a $141 million Engineering, Procurement and Construction contract by Oneida LP. All of these projects further demonstrate Aecon's strategic focus in the industry with respect to projects linked to decarbonization, energy transition, and sustainability and represent more collaborative procurement models than have traditionally been used.

In the Concessions segment, in addition to expecting an ongoing recovery in travel through the Bermuda International Airport through 2023, there are a number of opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months, including projects with private sector clients that support a collective focus on sustainability and the transition to a net-zero economy. The GO Expansion On-Corridor Works project and the Oneida Energy Storage project noted above are examples of the role Aecon's Concessions segment is playing in developing, operating and maintaining assets related to this transition.

At September 30, 2023, Aecon had a committed revolving credit facility of $600 million, of which $30 million was drawn and $9 million utilized for letters of credit. On December 31, 2023, convertible debentures with a face value of $184 million will mature and the Company expects to repay these debentures at maturity or before. The Company has no other debt or working capital credit facility maturities in 2023, except equipment loans and leases in the normal course.

CONSOLIDATED RESULTS

The consolidated results for the three and nine months ended September 30, 2023 and 2022 are available at the end of this news release.

CONFERENCE CALL

A conference call and live webcast has been scheduled for 9 a.m. (Eastern Time) on Thursday, October 26, 2023. To participate in the conference call, please pre-register using this link. After registering, an email will be sent, including dial-in details and a unique access code required to join the live call. Please ensure you have registered at least 15 minutes prior to the conference call time.

A live webcast of the conference call will also be available on the company's website.

An accompanying presentation of the third quarter 2023 financial results will also be available after market close on October 25, 2023 on the company's website. For those unable to attend the call, a replay will be available within one hour following the live conference call on the company's website.

ABOUT AECON

Aecon Group Inc. (TSX: ARE) is a national Canadian construction and infrastructure development company with global experience. Aecon delivers integrated solutions to private and public-sector clients through its Construction segment in the Civil, Urban Transportation, Nuclear, Utility and Industrial sectors, and provides project development, financing, investment and management services through its Concessions segment.

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