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Edited Transcript of ARE.TO earnings conference call or presentation 1-Nov-19 2:00pm GMT

Q3 2019 Aecon Group Inc Earnings Call

Toronto Nov 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Aecon Group Inc earnings conference call or presentation Friday, November 1, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adam Borgatti

Aecon Group Inc. - SVP of Corporate Development & IR

* David Smales

Aecon Group Inc. - Executive VP & CFO

* Jean-Louis Servranckx

Aecon Group Inc. - President, CEO & Director

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Conference Call Participants

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* Benoit Poirier

Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst

* Christopher Allan Murray

AltaCorp Capital Inc., Research Division - MD of Institutional Equity Research for Diversified Industries & Senior Analyst

* Frederic Bastien

Raymond James Ltd., Research Division - MD & Equity Research Analyst

* Jacob Jonathan Bout

CIBC Capital Markets, Research Division - MD of Institutional Equity Research

* Kyle Brock

RBC Capital Markets, Research Division - Associate

* Maxim Sytchev

National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst

* Michael Tupholme

TD Securities Equity Research - Research Analyst

* Yuri Lynk

Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to Aecon's Q3 2019 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Adam Borgatti, SVP of Investor Relations. Please go ahead, sir.

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Adam Borgatti, Aecon Group Inc. - SVP of Corporate Development & IR [2]

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Thank you, [Julianne]. Good morning, everyone, and thanks for participating in our third quarter 2019 results conference call.

This is Adam Borgatti, SVP of Corporate Development and Investor Relations, speaking. Presenting to you this morning are Jean-Louis Servranckx, President and CEO; and David Smales, Executive Vice President and CFO.

Our earnings announcement was released yesterday evening, and we have posted a slide presentation on the Investing section of our website, which we will refer to during this call. Following our comments, we will be glad to take questions from analysts.

As noted on Slide 2 of the presentation, listeners are reminded that the information we are sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although Aecon believes that the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct.

I will now turn the call over to David.

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David Smales, Aecon Group Inc. - Executive VP & CFO [3]

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Thank you, Adam, and good morning, everyone. Before addressing quarterly results, last night, Aecon announced receipt of regulatory approval from the Toronto Stock Exchange to make a normal course issuer bid or NCIB commencing November 5, 2019. Under the NCIB, Aecon will be able to purchase for cancellation up to a maximum of approximately 6 million common shares on the open market, representing approximately 10% of Aecon's public float.

We believe that the repurchase of common shares at certain market prices is beneficial to Aecon and its shareholders in intend to make any purchases on an opportunistic basis, taking share price and other considerations at the time into account.

I'll now touch briefly on Aecon's consolidated results and then review results by segment before turning the call over to Jean-Louis.

Turning to Slide 3. Revenue for the 3 months ended September 30, 2019, of $1 billion was $6 million or 1% higher compared to the same period in 2018. On a like-for-like basis, excluding the contract mining business sold in November 2018, revenue was 7% higher in the quarter.

Slide 4 outlines the impact on results of the sale of the contract mining business.

Adjusted EBITDA for the third quarter of $91.1 million and margin of 8.9%, increased by 2% compared to adjusted EBITDA of $89.5 million, a margin of 8.8% for the same period last year. Adjusted EBITDA on a like-for-like basis increased by 11% in the quarter.

Third quarter operating profit of $58.8 million increased by 5% compared to the prior period of $56.2 million and diluted earnings per share of $0.60 was unchanged compared to the third quarter of 2018.

Reported backlog at the end of the quarter of $6.6 billion compared to backlog of $7 billion a year earlier.

Now turning to results by segment. As noted on Slide 5. Construction revenue of $1 billion in the third quarter was $7 million or 1% higher than the same period last year. This increase was driven by higher revenue in civil operations and urban transportation systems in both Eastern and Western Canada. Revenue was also higher from nuclear operations related to refurbishment work in Ontario. These increases were partially offset by lower revenue in the conventional industrial sector following the sale of the contract mining business in November last year and in the utility sector from reduced mainline pipeline volume.

Adjusted EBITDA in the Construction segment of $73.1 million and margin of 7.3%, decreased by $3.4 million compared to $76.5 million and margin of 7.7% in 2018. This was due to the sale of the contract mining business, which contributed adjusted EBITDA of $7.3 million in the third quarter of 2018.

New contract awards of $798 million in the third quarter was significantly lower than the same period last year, as 2 large projects The Gordie Howe International Bridge and Section 1 of the Gardiner Expressway rehabilitation were awarded in the third quarter of 2018. Construction backlog at the end of September was $6.5 billion, which is $475 million lower than the same time last year.

Turning to Slide 6. Concessions revenue for the third quarter was $62 million, a decrease of $9 million or 13% compared to the same period last year primarily as a result of lower construction activity related to the new airport terminal in Bermuda.

Adjusted EBITDA in the Concessions segment of $25.2 million was up by $2.2 million compared to $23 million in the same period last year. The increase was primarily due to a higher contribution from management and development fees in the quarter related to Canadian concessions.

At this point, I'll turn the call over to Jean-Louis.

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [4]

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Thank you, David. Turning now to Slide 7. Aecon diverse and resilient business model is well positioned to deliver continued strong and stable results. The Construction segment is aligned to the significant infrastructure investment commitments by all levels of government across Canada as well as by the private sector. The Concessions segment is actively pursuing a number of large-scale infrastructure projects that require private finance solutions and participating as a concessionaire of the 5 P3 projects identified on the slide.

Turning now to Slide 8. As David mentioned earlier, backlog at the end of the quarter was $6.6 billion. Backlog to be worked off in the next 12 months of $2.5 billion increased $444 million over last year and over 60% of backlog is for work off beyond the next 12 months, providing significant visibility and stability to Aecon's longer-term outlook.

Trailing 12-months recurring revenue was up 3% on a like-for-like basis over last year, reflecting the significant ongoing revenue from recurring work and the long-term agreements and concession agreements.

We remain very focused on the strong execution of our backlog while ensuring we continue to build capacity and flexibility for further growth.

Referencing now to Slide 9 and 10, Aecon's balance sheet and financial capacity remain key advantages in our ability to grow in the coming years both in Canada and on select international projects.

Turning now to Slide 11. Our overall outlook for 2019 remains solid as our current strong backlog, robust pipeline of future opportunities and ongoing concessions are expected to lead to improved like-for-like results compared to 2018. Aecon expects to have another strong year of results in 2020, as construction continues on a number of previously awarded projects that have ramped up during the year 2019.

In the Construction segment, bidding activity continues to be solid with many of the company's larger pursuits expected to be awarded in 2020. With strong and diverse backlog in hand, Aecon is focused on continuing to pursue a balanced portfolio of work and on ensuring solid execution on all of our projects. Our disciplined bidding approach supports an expectation of continued like-for-like margin improvement in this segment.

The Concessions segment continues to partner with Aecon's Construction segment to focus on the significant number of P3 opportunities in Canada and on a selected basis internationally as well as preparations for a smooth transition from the existing to the new terminal in Bermuda in 2020.

Thank you, and we will now turn the call over to analysts for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Yuri Lynk from Canaccord Genuity.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [2]

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Maybe for David. Good quarter, by the way, but obviously, a big investment in working cap. Can you just comment on the increase in your DSOs and your days of WIP outstanding in the context of how your projects are progressing and how you feel your execution is so far?

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David Smales, Aecon Group Inc. - Executive VP & CFO [3]

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Yes. So I mean obviously, we see a seasonal build in working capital through Q2 and Q3. And we had obviously significant volume in Q3 this year. Last year, that seasonality was masked a little bit by the fact we had the award of a number of projects in that Q3 phase where we got big advanced payments that kind of offset the normal seasonality. So it's what we typically see, I would say, this year, just from a pure timing perspective, we had some significant amounts come in right after the quarter end. And so if you would normally expect to see in Q4 with a bit of a reversal in working capital, we think that trend obviously continues this year and probably a little bit more than in previous fourth quarters because -- just because some of the timing between the end of Q3 and early Q4. So nothing other than kind of the normal seasonality with a few timing issues right at the end of the quarter.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [4]

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Okay. And for '19 as a whole, do you think that, that reversal can get -- would we be -- get back to breakeven on working cap? Or should we expect an investment this year?

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David Smales, Aecon Group Inc. - Executive VP & CFO [5]

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I think, overall, it will be a small investment. I mean overall, I think the way we're trending on revenue for the full year and on a trailing 12-month basis, it's obviously growth in revenue overall. And so that will be a factor. And the nature of some of the ins and outs on the milestones on these big projects can swing it kind of quarter-to-quarter. So certainly by the time we hit the end of Q1, it will have fully reversed by the end of Q4, I still think it'd be a slight investment on the full year basis.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [6]

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Okay. Secondly, can you just give us some more color on what we should expect for CapEx in 2020? You mentioned in the outlook section plans to build an asphalt plant in Western Canada. Is that part of the Yellowline JV and what's that going to cost?

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David Smales, Aecon Group Inc. - Executive VP & CFO [7]

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Yes. No, it's not part of Yellowline. The reference to the asphalt plant is for 2019 in terms of an uptick in CapEx in '19 versus '18. So that won't go into 2020. For 2020, we expect CapEx to be lower than 2019. 2019 will probably be if you look at history and assuming an elevated level of CapEx, and it would turn back to kind of more normal levels in 2020. So I think 2020 will be somewhat similar to '18, with '19 being a bit of an outlier.

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Operator [8]

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Your next question comes from Benoit Poirier from Desjardins Capital Markets.

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Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [9]

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David, I was wondering, or Jean-Louis, if you could talk a little bit -- you talked about the international opportunities. I was wondering if you was -- if you were referring more for a Construction or Concession. And as the Bermuda construction activities are winding down, I was wondering if there's any color you could provide related to the timing to bring another concession opportunity? And if there's any color about the timing on that?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [10]

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Okay. We are looking for both opportunities in the Concession sector and the Construction sector, vigilantly replicating project like Quito Airport or Bermuda Airport would be quite an interesting fit for the company. We have a small development team working on this. It's a problem of opportunity. And when we find the good opportunities, I mean we are able to focus on them and to go forward.

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Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [11]

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Okay. Okay. Perfect. And with respect to the NCIB, I was just curious to have your thoughts or reason behind the launch. I assume that it was valuation-driven. Is there kind of -- what you can provide in terms of color with respects if we should expect Aecon to be active with respect to your NCIB?

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David Smales, Aecon Group Inc. - Executive VP & CFO [12]

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Yes. I mean I think it will depend on how things play out over the next 12 months. I think the thought process is that despite a fairly consistent track record over the last little while and good execution, the share price has seen a little bit of a disconnect in terms of industry issues elsewhere. And so we just want the flexibility to be able to use any opportunities to capitalize on that disconnect I guess. So we'll see how things play out. We've got no set minimums or maximums in mind. We'll just play it as we see it over the course of the next 12 months.

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Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [13]

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Okay. And Jean-Louis, for the international opportunities on the construction front, would it be fair to say it's more a U.S. focus rather than a global basis?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [14]

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It can be both. Obviously, we are looking at U.S., as I've always said in the previous call, I mean prudently, U.S. is a major market, which will probably go through an acquisition. We are contemplating, I mean every month various opportunities, and if we find a good opportunity, we will be ready to save it. And on the global international, I mean it's more about Caribbean or maybe South America in terms of construction on selected topics where we are performing well at home.

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Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [15]

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Okay. Okay. That's great color. And last question for me. When we look at the pricing or the contract now that there are some players that are exiting the lump sum project, I was wondering if you could talk about the overall pricing environment whether we should expect a more favorable pricing environment, given it seems that the risk will shift differently than it used to be in the past. And also I've seen that Ontario launches a new procurement model with Union Station, RFQ. I was wondering if -- is there any implication for you guys in terms of what you're seeing in terms of the shift?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [16]

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Yes, we are extremely disciplined, and you have probably noticed it on our pursuits and on the way we price our bids. The issue is not to be bulimic as you've just said, I mean there's a lot of opportunities. And we just have to carefully select and focus on our targeted opportunities that fit best with our capacity. And this is very important. So the fact that some players have a little shifted back from infrastructure projects just makes the competitive situation a little better, but competition is still existing.

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Operator [17]

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Your next question comes from Frederic Bastien from Raymond James.

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [18]

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Maybe just build on Benoit's asked question with respect to Ontario. Obviously, the sector has experienced a bit of a lull this year in terms of new procurement. Are you seeing any changes heading into 2020?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [19]

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We see that there's a lot of projects coming. It was just the time for the new government of the province to, as usually, make an audit of what was on the table and then to assess and then to define their own priorities. I mean there's been a conference 2 months ago with an extremely important program of infrastructure in Ontario, mainly mass transit, but also we could see some roads and bridge jobs. So I'm not that much worried. It's about electoral cycles. Ontario, I mean is active. Growth of the population is strong, and we just think that all this lead to a good pipeline for infrastructure projects where we are.

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [20]

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And maybe moving to a national scale. Obviously, Aecon's operated through various forms of government over its long history. What do you make of the next couple of years in terms of opportunities in a minority-level government?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [21]

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Can you repeat the question, please?

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [22]

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Yes. I mean you obviously have worked through various forms of government over your 50 years of history. Just wondering what you kind of make of the opportunities going forward in a minority-level government. Do you expect priorities towards infrastructure spending to shift materially? Or is it business as usual from your perspective?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [23]

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I would say it's business as usual. I mean in Aecon, we don't make politics, we are builders. And the main driver is about the growth of the population. This population needs mass transit, needs motorways, need water treatment plant, need power supplies and although you have micro cycles depending on political cycles, at the end of the day, we just see that these opportunities are there because the needs are there and the politicians are all there to serve the citizens of this country. So we are not that much worried with a minority government.

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Operator [24]

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Your next question comes from Jacob Bout from CIBC.

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Jacob Jonathan Bout, CIBC Capital Markets, Research Division - MD of Institutional Equity Research [25]

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So another strong quarter here. If we think about the fourth quarter, is it going to be similar to what we saw over the past couple of quarters? Or should we be thinking about kind of a flattish type quarter after backing your contract money if we compare your...

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David Smales, Aecon Group Inc. - Executive VP & CFO [26]

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Yes, Jacob. So obviously, we'll see the normal seasonality. I think when we talked a quarter ago, we talked in the context of the second half of the year and our view of the second half relative to the second half of last year, I would say, that view hasn't really changed. We said then the second half of the year, last year, is a tough comp, still a case going into Q4. And last year, we had a bit of a pickup on the concession side too, which we would normally expect to see seasonally softer in Q4 because there's less traffic through Bermuda, and it's not the height of the tourism season, but that was more than offset in the Concessions segment in Q4 last year by some onetime development and success fees related to the new projects we've been awarded. So outside of that concessions noise, yes, I mean a similar Q4 this year to last year, and last year being a good quarter.

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Jacob Jonathan Bout, CIBC Capital Markets, Research Division - MD of Institutional Equity Research [27]

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And then your thoughts on margin expansion going into 2020, how should we be thinking about that as some of these newer projects are ramping?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [28]

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So it's true that most of the projects we've been awarded in 2018 are finalizing their engineering phase. So -- and also some of the early works. So we are now ramping up for construction. As you know, early construction is done on the open air. So there is seasonality about winter, but definitely 2020, with most of our major projects were in 2018, beginning a strong phase of execution, yes.

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Jacob Jonathan Bout, CIBC Capital Markets, Research Division - MD of Institutional Equity Research [29]

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And what are you targeting right now for margins?

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David Smales, Aecon Group Inc. - Executive VP & CFO [30]

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We don't give EBITDA margin targets, Jacob. So we -- our consistent message has been we expect to see margins steadily over time improve based on the nature of backlog and the environment we're bidding in right now and the types of projects we're pursuing. But we don't put a specific margin guidance out to the market.

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Operator [31]

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Your next question comes from Chris Murray from AltaCorp.

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Christopher Allan Murray, AltaCorp Capital Inc., Research Division - MD of Institutional Equity Research for Diversified Industries & Senior Analyst [32]

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Just, I guess turning back to the Concessions segment for a bit. So just a few moving parts here. David, thanks for calling out, Q4 may have had some onetime items in there. But how do we think about, I guess two pieces of this, the EBITDA generation from the business? I expect the revenue will drop next year just because you'll finish the construction in Bermuda. But how do we think about this segment going forward?

And then the second part of this question, and you look at one of the concessions now, now that you're moving into that operation side. As we go forward, when we go through 2020 and into the next decade, what are your thoughts around asset recycling? So basically we're selling the concessions that you've got up matured as you move on to other new concessions?

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David Smales, Aecon Group Inc. - Executive VP & CFO [33]

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Yes. So to the first piece of that question, if you look at our Concession segment overall, we have a few ins and outs over the next little while. We have some of the Canadian concessions coming on stream over the next couple of years, and we have Bermuda from an operations perspective, relatively stable. It's moving from an existing terminal to a new terminal. Some upside potential in terms of earnings from that operation, which will grow over time, but nothing dramatic in 2020 when we switch to the mills. So overall, you're right, revenue will come down a little bit as construction winds down, but the construction margin is all in the Construction segment, the impact of that on earnings in Concessions is relatively small.

And so overall, Concessions will be a fairly stable business over the next couple of years from an earnings perspective, certainly an EBITDA perspective. Growing, but growing modestly until the Canadian concessions really kick in, but that's still a few years away. We're still heavily into the construction cycle on those. So no dramatic changes in the Concessions profile from an earnings perspective over the next kind of 12 to 24 months.

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Christopher Allan Murray, AltaCorp Capital Inc., Research Division - MD of Institutional Equity Research for Diversified Industries & Senior Analyst [34]

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Okay. And then the concept of starting to think about recycling some of these assets once they are mature?

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David Smales, Aecon Group Inc. - Executive VP & CFO [35]

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Yes. I mean I think we've taken the approach, certainly with Bermuda that we will look at that value proposition over time. We certainly don't feel any pressure to divest our interest in Bermuda. We think that's an attractive long-term opportunity that we will potentially want to stay involved in. We have the option to sell a piece potentially. We're 100% of that operation today, but that will be purely value-driven, and we'll kind of look at that as we go forward. But obviously, our focus right now is on finishing construction, getting operations ramped up for the new terminal, and I wouldn't expect anything imminent in Bermuda.

As far as the Canadian ones, again, no pressure to do anything with those. We will get them built and up and running from an operations perspective. And we'll see in the future, how things look. But at this point, our mindset is we -- we're long-term operators of these assets to the extent that there's not a more interesting opportunity out there.

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Christopher Allan Murray, AltaCorp Capital Inc., Research Division - MD of Institutional Equity Research for Diversified Industries & Senior Analyst [36]

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Okay. Fair enough. And then just one other question. So I think last quarter, you talked about the fact that you were expecting to start construction of the TMX pipeline. Just any update you can give us on that? And then certainly, there's been some commentary from the new federal government that they want to get it built and it feels like they want to get it built right away. So I guess two parts of that. So first of all, the update. But second, if possible, can you accelerate your activity on that project if needed?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [37]

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Well, as stated by the Prime Minister, you're right. I mean this government is committed to execute this pipeline. I remind you that we have been awarded 3 spreads. We have just kicked off the spread number one in Alberta. It's about installation and early works. We're on it at the moment. And in terms of acceleration, I mean we just depend on the notice to proceed from the owner, but we are perfectly ready. We have the capacity to do it, in addition to the job we have already been awarded on coastal pipeline. So we're ready to do it. And that's good because it's one of our core competency where we have just proven we can be extremely efficient.

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Operator [38]

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Your next question comes from Maxim Sytchev from National Bank Financial.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [39]

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Jean-Louis, maybe a question for you. As you talk about contemplating the strategy around the U.S. expansion, given some of the very difficult execution issues that, like a lot of peers faced on the U.S., how do you think about due diligence, risk assessment on anything that you guys are kind of looking at right now potentially?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [40]

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Okay. So maybe the first part of the question about U.S. expansion. As I've always said, we -- it's a major market. So it's good to have a look at it through an acquisition. We are, at the moment, contemplating every month, some opportunities, which are rather small. And we have a team totally dedicated to due diligence, thorough examination of the accounts, of the activities, of the backlog, of the relation with the clients, with the trade unions. So yes, it's important for us. There is no rush, as I've always said, it's a problem of opportunity. And as I said at the beginning of this call, we are not going to be bulimic means that we just want to be extremely serious and focused on new awards or new acquisitions.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [41]

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All right. Okay. Now that's very helpful. And then David, if I may. Given the fact that as I think Jean-Louis was talking about the staging of the major projects that were won in 2018 are really going to be ramping up in 2020 from a construction revenue generation perspective. So should we expect a pickup in terms of revenue generation year-on-year in 2020 versus '19? Or can you help us out a little bit there on construction?

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David Smales, Aecon Group Inc. - Executive VP & CFO [42]

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Yes. No, I think it's fair to say we expect to see revenue growth in 2020 on the back of just the -- I mean if you look at the backlog position today and the next 12 months' worth of backlog versus that same position 12 months ago, it's gone up significantly. So that feeds the revenue for 2020. And so yes, I mean it's fair to say we expect to see solid growth in 2020.

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Operator [43]

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Your next question comes from Michael Tupholme from TD Securities.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [44]

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Just related somewhat to that last question. You've talked about bidding activity continuing to be pretty solid. And the prospect of some awards coming through in 2020 based on the bidding opportunities that you're pursuing right now. Do you see that possibly leading to a step function change in backlog, similar to what you saw in '18, assuming you win your fair share of awards? Or is this going to be more of a situation whereby it's simply going to be kind of replenishing the backlog that you work off?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [45]

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So first point, as you probably recall from the last call, I've always said that we are comfortable with the backlog between $6 billion and $7 billion and with an amount of around 60% to be executed after 12 months. This is exactly where we are today. So I'm paying a lot of attention on developing a diverse and balanced backlog. I mean we have small projects. And just remind you that, for example, a little more than 500 projects executed by Aecon are inferior to $15 million in total revenue. We have medium projects, and we have big projects. We have construction projects and concession projects. We work in the civil and we work in urban transportation. We work in industrial. I also want to be balanced in industrial between nuclear, utilities, conventional industrial, we also need to be balanced between West and East Canada. And this -- all this makes Aecon stronger, and I put a lot of attention about it. So they should not be a different or shift in our backlog.

We are looking at this diversity and this balance, and this is exactly what has happened during the last month. I mean 2018, has been quite a strong year in terms of big awards. And as you have seen, I mean we haven't taken that much of big award during the last 14 months. I mean it was only the Highway 401 for a total amount of $600 million, and we still have a $6.6 billion backlog, although we have executed something like $3.3 billion of activity during the last 12 months. So we are perfectly in line with our strategy of discipline and focusing on what we think we do better than the other competitors on this market.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [46]

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Okay. That's helpful. And maybe just a follow-on from that, Jean-Louis. When you talk about the balance that you referred to, be it in terms of geographic regions or across different project types. Do you feel like your backlog is -- has the balance that you'd like it to have right now? Or are you pursuing a shift in any particular way?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [47]

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I have to say, I'm very much satisfied with -- at the same time, the diversity of the backlog, it is a focus of this backlog on our core competency and the balancing. I mean -- and in terms of activity, if you just come back to Slide #7, I mean it's remarkably balanced, and this is good and this is what make Aecon stronger.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [48]

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Okay. And then just one additional question. I think in the past, you've been asked about prospective opportunities to be involved in some capacity in the LNG Canada project as that construction moves along. Is there anything that you could possibly say about whether we're getting closer to the point where there may be an opportunity or if anything's evolved on that front?

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [49]

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On LNG Canada, we're already working on coastal pipeline, which is part of this major project. We are waiting for a second run of bidding activities on this job. It may come -- I mean our industrial, I would say, conventional industrial activity for years to come, may come from LNG Canada, but may come also for other clients and other locations in terms of new plants to be built in Canada.

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Operator [50]

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(Operator Instructions) Your next question comes from Kyle Brock from RBC Capital Markets.

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Kyle Brock, RBC Capital Markets, Research Division - Associate [51]

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This is Kyle on behalf of Derek. We know that there is some direct -- the direct costs were up a little bit year-over-year despite similar activity levels, and we're hoping if you could provide a bit of color on what's driving that?

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David Smales, Aecon Group Inc. - Executive VP & CFO [52]

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So I missed that you say indirect or direct costs?

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Kyle Brock, RBC Capital Markets, Research Division - Associate [53]

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Direct costs.

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David Smales, Aecon Group Inc. - Executive VP & CFO [54]

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Yes. It's just I mean a function of the mix of revenue really. I mean obviously, at the end of the day, what we're focused on is the margin profile. And overall, when you take out -- when you look at margins, even with the impact of mining, but particularly when you take the impact of mining out, margins have continued to look strong. And -- so the mix of work can drive some variability, but overall, we're pretty happy with the margin performance of the business. There's nothing particularly unusual in that number that I would call out.

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Kyle Brock, RBC Capital Markets, Research Division - Associate [55]

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Okay. And with respect to the NCIB, how should we be thinking about potential share repurchases as part of your broader capital allocation strategy moving forward?

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David Smales, Aecon Group Inc. - Executive VP & CFO [56]

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Well, I think as I said earlier, the idea here is that we certainly feel there's been some disconnect in the last little while between the way the business is performing and is positioned and how the stock prices has played out with bigger market or infrastructure overlay. So it's really a question of being opportunistic, but with an eye to being able to create shareholder value when the opportunity arises. And as I said earlier, there's no particular overriding goal that we have to spend a certain amount or we have to achieve a certain outcome. It really is going to be driven by how things play out between now and the next 12 months. But we -- as you can see, we've got lots of financial flexibility. And if the disconnect continues, and we think we're undervalued then we want to be able to take advantage of that for the benefit of shareholders, and we think that's the right thing to do.

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Kyle Brock, RBC Capital Markets, Research Division - Associate [57]

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Okay. And with respect to the concession assets, was the Bermuda airport impacted all by Hurricane Dorian in the quarter?

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David Smales, Aecon Group Inc. - Executive VP & CFO [58]

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Yes, I think Humberto was the big hurricane that hit Bermuda in September. So that did have an impact on a number of flights that were canceled in September. I think the number is something like 20 to 22 flights were canceled through that period of time. So that did have a little bit of an impact on the Q3 results. But as you can see, the results were still pretty strong in the Concessions segment and didn't have a material overall impact.

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Jean-Louis Servranckx, Aecon Group Inc. - President, CEO & Director [59]

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Maybe I can add something in terms of Construction. We experienced through these hurricane winds around 125 miles per hour. All our construction has been calibrated on a little more than 170 miles per hour. The response of all the building has been remarkable through this hurricane, and we are extremely happy about it.

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Operator [60]

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We have no further questions. I turn the call back over to the presenters.

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David Smales, Aecon Group Inc. - Executive VP & CFO [61]

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Pretty good. Well, thank you all for joining us. And once again, if you have any follow-up questions, feel free to reach out at any time and have a great rest of the day and into the weekend.

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Operator [62]

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This concludes today's conference call. Thank you for your participation. You may now disconnect.