Mr. Ian Edwards reports
SNC-LAVALIN REPORTS SECOND QUARTER 2021 RESULTS
SNC-Lavalin Group Inc. has released its results for the second quarter ended June 30, 2021.
Chief executive officer commentary
"We are pleased with the solid financial results for the first half of the year. SNCL Engineering Services delivered robust second quarter performance led by strong profitability within our three segments. Our LSTK projects progressed well, the related backlog continued to decrease and discussions with our clients on compensation for the additional costs related to COVID-19 impacts have been constructive," said Ian L. Edwards, president and chief executive officer of SNC-Lavalin Group. "We are also pleased to have recently closed the sale of a substantial portion of our resources oil and gas business, which represents an important strategic milestone for the company. With these second quarter results and the current trends across our businesses, we remain on track to meet our 2021 outlook expectations."
Second quarter results
Professional services and project management are collectively referred to as PS&PM to distinguish them from capital activities. PS&PM groups together five of the company's segments, namely engineering, design and project management (EDPM), nuclear, infrastructure services, resources, and infrastructure EPC projects, while capital is its own reportable segment and separate from PS&PM.
The company's net income from continuing operations attributable to SNC-Lavalin shareholders was $29.2-million, or 17 cents per diluted share in Q2 2021, compared with a net loss from continuing operations attributable to SNC-Lavalin shareholders of $25.3-million, or 14 cents) per diluted share, for the corresponding period in 2020. This comprised net income from continuing operations from PS&PM of $26.1-million, or 15 cents per diluted share, and net income from continuing operations from capital of $3.1-million, or two cents per diluted share in Q2 2021. For the corresponding period in 2020, net loss from continuing operations comprised a net loss from continuing operations from PS&PM of $31.9-million, or 18 cents per diluted share, and net income from continuing operations from capital of $6.6-million, or four cents per diluted share.
Q2 2021 net income included amortization of intangible assets related to business combinations of $20.5-million ($17.2-million after income taxes or 10 cents per diluted share) and restructuring and transformation costs of $15.2-million ($11.3-million after income taxes or six cents per diluted share), while Q2 2020 included amortization of intangible assets related to business combinations of $40-million ($32.7-million after income taxes or 19 cents per diluted share) and restructuring and transformation costs of $23.9-million ($20.9-million after income taxes or 12 cents per diluted share).
Adjusted net income from PS&PM in Q2 2021 more than doubled and totalled $53.8-million, or 31 cents per diluted share, compared with $21.7-million, or 12 cents per diluted share, for Q2 2020. The increase was mainly due to an increase of 9.5 per cent in segment adjusted EBIT (earnings before interest and taxes) from SNCL Engineering Services and a decrease in the negative segment adjusted EBIT in SNCL projects, partially offset by a higher income taxes expense.
Financial position and operating cash flow
As at June 30, 2021, the company had $662.9-million of cash and cash equivalents. The company also has an additional $2-billion of available drawing capacity under its revolving credit facility. As at June 30, 2021, the company had $1-billion of recourse debt and $400-million of limited recourse debt, and its net recourse debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio calculated in accordance with the terms of the company's credit agreement was 1.8, below the required covenant level of 3.75.
The company's net cash generated from operating activities was $78.1-million in Q2 2021, compared with $129.8-million in Q2 2020. Net cash generated from operating activities in SNCL Engineering Services totalled $157-million in Q2 2021. The company continues to anticipate that its net cash generated from operating activities in 2021 will broadly break even, as positive operating cash flow from SNCL Engineering Services is expected to be largely offset by an operating cash flow usage in SNCL projects.
Virtual investor day
SNC-Lavalin will host a virtual investor day on Tuesday, Sept. 28, 2021, at 8:30 a.m. Eastern Time. Mr. Edwards, president and chief executive officer, Jeff Bell, executive vice-president and chief financial officer, and other members of the leadership team will provide an in-depth review of the business strategy, financial outlook and initiatives to drive long-term stakeholder value. A live webcast of the presentation, including question-and-answer sessions, will be available the day of the event on the company's
investor day 2021 Web page. Registration is required and can be completed in advance on the company's investor day 2021 Web page. A replay of the webcast will be available on the investor relations Web page following the event.
SNCL Engineering Services 2021 outlook maintained
The company continues to expect SNCL Engineering Services revenue for full-year 2021 to increase by a low single-digit percentage, reflecting current currency rates, compared with 2020, and for its segment adjusted EBIT to segment revenue ratio to be between 8 per cent and 10 per cent for the full year 2021.
The board of directors today declared a cash dividend of two cents per share, unchanged from the previous quarter. The dividend is payable on Aug. 27, 2021, to shareholders of record on Aug. 13, 2021. This dividend is an eligible dividend for Canadian federal and provincial income tax purposes.
Second quarter 2021 conference call/webcast
SNC-Lavalin will hold a conference call today at 8:30 a.m. Eastern Time to review results for its second quarter of 2021. A live audio webcast of the conference call and an accompanying slide presentation will be available at
the company's investor Web page. 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.
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.
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