Mr. Ian Edwards reports
SNC-LAVALIN REPORTS THIRD QUARTER 2020 RESULTS
SNC-Lavalin Group Inc. has provided its results for the third quarter ended Sept. 30, 2020.
2020 third quarter highlights
Net loss attributable to SNC-Lavalin shareholders of $85.1-million, or 48 cents per diluted share, compared with net income of $2,756.7-million, or $15.70 per diluted share for Q3 2019:
Q3 2019 included a net gain on the disposal of a 10.01-per-cent stake of Highway 407 ETR of $2,587.8-million, or $14.74 per diluted share.
Q3 2020 had an income tax expense of $45.1-million, which included a reduction of deferred income tax assets, while Q3 2019 included $82.7-million income tax recoveries on capital losses, following the capital gain on disposal of a 10.01-per-cent stake in Highway 407 ETR.
SNCL Engineering Services delivered solid results; outlook tightened:
Total segment adjusted EBIT (earnings before interest and taxes) of $142.4-million, representing a 9.8-per-cent margin;
Segment adjusted EBIT margin of 9.0 per cent, 16.1 per cent and 7.8 per cent for engineering, design and project management, and nuclear and infrastructure services, respectively;
Backlog remains strong at $10.7-billion as at Sept. 30, 2020, with Q3 2020 bookings of $1.2-billion;
Outlook for Q4 2020 segment adjusted EBIT margin tightened to between 8.5 per cent and 9.5 per cent.
Resources services transformation progressing well:
Q3 2020 resources services revenues of $267.1-million and segment adjusted EBIT of negative $14-million, slightly better than management's previously communicated expectation of between negative $15-million to $25-million;
Progress on overhead reduction and country exits remains on track.
SNCL projects results affected by arbitration ruling, COVID-19:
Total negative segment adjusted EBIT of $100.1-million included a $57.9-million unfavourable arbitration ruling on an LSTK legacy project and lower productivity caused by COVID-19 impacts;
LSTK projects backlog reduced by $600-million in the quarter to $2.1-billion, with $1.9-billion of infrastructure EPC projects backlog.
Financial position remains strong
As at Sept. 30, 2020, cash and cash equivalents at $1.1-billion and net recourse debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio at 1.7 (calculated in accordance with credit agreement).
Chief executive officer commentary
Ian L. Edwards, president and CEO of SNC-Lavalin, made the following comments:
"Our engineering services business continued to deliver solid results in the quarter, supported by strong performance in the transportation, defence and nuclear markets in our core regions. The transformation of our resources services business is on track as we move quickly to restructure and reduce overhead costs, and we look forward to additional positive EBIT from this business in 2021.
"As expected, LSTK project productivity continued to be impacted by COVID-19, with infrastructure EPC projects reporting a loss in the quarter. We also had in the quarter an unfavourable arbitration ruling on a completed LSTK Resources legacy project, for which the ruling was outside our internal and external experts' assessments. While we believe our current litigation risk assessment processes are appropriate, we are undertaking a further review of the remaining LSTK legacy litigation matters to provide additional assurance. Despite the productivity challenges related to COVID-19, the LSTK backlog continued to reduce and we expect to largely complete the resources LSTK projects by the end of the year."
THIRD QUARTER FINANCIAL HIGHLIGHTS
(in thousands of dollars, unless otherwise indicated)
Total revenue $2,005,732 $2,432,163
Net income (loss) attributable to SNC-Lavalin shareholders (85,125) 2,756,714
Diluted EPS ($) (0.48) 15.70
SNCL engineering services
Revenue 1,447,727 1,501,937
Segment adjusted EBIT 142,356 175,742
Segment adjusted EBIT to revenue ratio (%) 9.8% 11.7%
Backlog 10,699,700 11,233,300
Revenue 519,111 850,622
Segment adjusted EBIT (100,122) (44,971)
Segment adjusted EBIT to revenue ratio (%) (19.3%) (5.3%)
Backlog 3,091,900 4,216,700
Revenue 38,894 79,604
Segment adjusted EBIT 37,094 77,137
Backlog 162,000 182,800
Net cash used for operating activities (136,293) (51,063)
Adjusted EBITDA from PS&PM 72,763 184,892
Adjusted diluted EPS rom PS&PM ($) (0.33) 0.94
Third quarter results
The company reported a net loss attributable to SNC-Lavalin shareholders of $85.1-million, or 48 cents per diluted share in Q3 2020, compared with a net income of $2,756.7-million, or $15.70 per diluted share, for the corresponding period in 2019, which included a net gain on the disposal of a 10.01-per-cent stake of Highway 407 ETR of $2,587.8-million, or $14.74 per diluted share. Q3 2020 net loss included restructuring costs of $25.8-million (after taxes), mainly related to the resources services transformation announced on July 31, 2020.
The board of directors today declared a cash dividend of two cents per share, unchanged from the previous quarter. The dividend is payable on Nov. 27, 2020, to shareholders of record on Nov. 13, 2020. This dividend is an eligible dividend for Canadian federal and provincial income tax purposes.
The company expects, assuming no significant deviation from the current COVID-19 worldwide situation, that SNCL Engineering Services revenue for Q4 2020 should decrease by a low to mid-single digit percentage, compared with Q4 2019, and has tightened the outlook for its segment adjusted EBIT as a percentage of revenue to between 8.5 per cent and 9.5 per cent for the same period.
This outlook is based on the assumptions and methodology described in the company's third quarter 2020 management's discussion and analysis under the heading, "How we budget and forecast our results."
SNC-Lavalin will hold a conference call today at 8:30 a.m. EDT to review results for its third quarter of 2020. A live audio webcast of the conference call and an accompanying slide presentation will be available at
the company's website. The call will also be accessible by telephone, please dial toll-free at 1-800-319-4610 in North America or dial 1-604-638-5340 outside North America. You can also use the following numbers: 416-915-3239 in Toronto, 514-375-0364 in Montreal, or 080-8101-2791 in the United Kingdom. A recording of the conference call and its transcript will be available on the company's website within 24 hours following the call.
About SNC-Lavalin Group Inc.
Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world. SNC-Lavalin connects people, technology and data to help shape and deliver world-leading concepts and projects, while offering comprehensive innovative solutions across the asset life cycle. The company's expertise is wide-ranging -- consulting and advisory, intelligent networks and cybersecurity, design and engineering, procurement, project and construction management, operations and maintenance, decommissioning, and sustaining capital -- and delivered to clients in four strategic sectors: EDPM (engineering, design and project management), infrastructure, nuclear and resources, supported by capital. People. Drive. Results.
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