Quarterly Reports

  • Q4 2016 reported IFRS net income of $1.6 million, or $0.01 per diluted share, which included $39.8 million of net loss on disposals and $87.8 million of restructuring costs which should remove a further $100 million from our cost base in 2017. Full year reported IFRS diluted EPS of $1.70.
  • Q4 2016 adjusted net income from E&C of $73.4 million, or $0.49 per diluted share. Full year adjusted diluted EPS from E&C of $1.51.
  • Q4 2016 SG&A expenses of $213.9 million, 1.7% lower versus Q4 2015. Full year SG&A expenses of $724.1 million, $131.5 million, or 15.4%, lower than 2015.
  • Strong diversified revenue backlog of $10.7 billion as at December 31, 2016.
  • Quarterly dividend increase of 5% to $0.273 per share.
  • 2017 Outlook: adjusted diluted EPS from E&C in the range of $1.70 to $2.00.
(in millions of CA$, except per share amounts) Q4
2016
Q4
2015
$
change
%
change
Revenues 2,211 2,646 -435 -16%
Gross margin 361 409 -48 -12%
Net income attributable to shareholders, adjusted1161011515%
Net income attributable to
SNC-Lavalin's shareholders, as reported
2 49 -47 -96%
Basic earnings per share ($) 0.01 0.33 -0.32 -97%
Diluted earnings per share ($) 0.01 0.33 -0.32 -97%

SNC-LAVALIN ANNOUNCES FOURTH QUARTER RESULTS, WITH A 2016 FULL YEAR ADJUSTED DILUTED EPS FROM E&C OF $1.51, A 5% INCREASE IN DIVIDEND AND AN INCREASE IN ITS OUTLOOK FOR 2017

Montreal | March 2, 2017

  • Q4 2016 reported IFRS net income of $1.6 million, or $0.01 per diluted share, which included $39.8 million of net loss on disposals and $87.8 million of restructuring costs which should remove a further $100 million from our cost base in 2017. Full year reported IFRS diluted EPS of $1.70.
  • Q4 2016 adjusted net income from E&C(1) of $73.4 million, or $0.49 per diluted share. Full year adjusted diluted EPS from E&C(2) of $1.51. 
  • Q4 2016 SG&A expenses of $213.9 million, 1.7% lower versus Q4 2015. Full year SG&A expenses of $724.1 million, $131.5 million, or 15.4%, lower than 2015.
  • Strong diversified revenue backlog(7) of $10.7 billion as at December 31, 2016. 
  • Quarterly dividend increase of 5% to $0.273 per share.
  • 2017 Outlook: adjusted diluted EPS from E&C(2) in the range of $1.70 to $2.00.

To watch Neil Bruce comment on SNC-Lavalin’s fourth quarter 2016 financial results, click here.

SNC-Lavalin Group Inc. (TSX: SNC) announces its results today for the fourth quarter ended December 31, 2016. 

“We were pleased with our 2016 performance, we delivered on our commitments and met our 2016 guidance,” said Neil Bruce, President and Chief Executive Officer, SNC-Lavalin Group Inc. “Going into 2017, we are well positioned within our industry to capitalize on organic growth in infrastructure, nuclear, renewables and sustaining capital across all four sectors and expect our Capital group to continue to perform well driven by Highway 407 ETR. Our diversified business model, solid balance sheet and strong diversified revenue backlog give us confidence that we can meet our growth ambitions. We expect 2017 to be another good year for SNC-Lavalin as we continue to progress in our Operational Excellence efficiency program, drive cost base competitiveness and continue building a performance-driven culture to deliver for our clients.”  

  • Q4 2016 reported IFRS net income was $1.6 million, or $0.01 per diluted share, compared to a net income of $49.2 million, or $0.33 per diluted share, for the corresponding period in 2015. Q4 2016 results included a loss of $39.8 million from the disposal of the Company’s Real Estate Facilities Management business and its local French operations and restructuring costs of $87.8 million, which should deliver a further costs reduction of $100 million out of the business in 2017. 
  • Adjusted net income from E&C(1) for Q4 2016 increased to $73.4 million, or $0.49 per diluted share, compared to $66.2 million, or $0.44 per diluted share, mainly due to lower SG&A, partially offset by lower gross margin. On a segmented basis, Oil & Gas and Mining & Metallurgy recorded a lower segment EBIT(5) in Q4 2016 compared to Q4 2015, while Infrastructure and Power segment EBIT(5) were in line with Q4 2015.  
  • Adjusted net income from Capital(3) for Q4 2016 was $42.6 million, or $0.28 per diluted share, compared with $35.3 million, or $0.23 per diluted share for the corresponding period in 2015, mainly due to a higher level of activity of capital investments and an increase in dividends from Highway 407 ETR.
  • Total selling, general and administrative (SG&A) expenses in Q4 2016 decreased by 1.7%, compared to Q4 2015. For the year ended December 31, 2016, SG&A expenses were $131.5 million lower than the corresponding period in 2015. This decrease included a $32.5 million one off favorable impact from revised estimates on legacy sites environmental liabilities and other asset retirement obligations as described in Q3. Excluding this one off favorable impact, total SG&A expenses decreased by $99.0 million, in line with our target of $100 million reduction for the full year.
  • Total E&C revenue for Q4 2016 was $2.1 billion, compared with $2.6 billion in Q4 2015. The variation was mainly due to a decrease in Oil & Gas, which despite having delivered its strongest quarter of 2016, had revenues lower than Q4 2015 and in the Mining & Metallurgy segment, as it continues to be affected by the persistent softer commodity prices. The Infrastructure and Power segments also had lower revenues in Q4 2016 versus Q4 2015, mainly due to near completion or completion of certain major projects.
  • The revenue backlog(7) totaled $10.7 billion at the end of December 2016. New contract awards for the fourth quarter amounted to $1.9 billion. Total contract awards for 2016 were $7.8 billion, including $4.0 billion in Oil & Gas, $1.7 billion in Power, $1.7 billion in Infrastructure and $0.4 billion in Mining & Metallurgy. 
  • The balance sheet remained strong at the end of December 2016 with cash and cash equivalents of $1.1 billion, compared to $0.9 billion at September 30, 2016 and $1.6 billion at December 31, 2015. 

2017 Outlook 
The Company is targeting an adjusted diluted EPS from E&C(2) for 2017 in the range of $1.70 to $2.00. 

While we anticipate continuing market challenges in 2017 in certain of the Company’s sectors, we expect to benefit from our recent restructuring savings and “Operational Excellence” program. As such, we expect increased Segment EBIT(5) margins for all segments in 2017, compared to 2016, except for Mining & Metallurgy. 

We anticipate increased Segment EBIT(5) from the Infrastructure and Power segments, mainly driven by North American capital spending growth and global nuclear opportunities, as well as increased Segment EBIT(5) from Oil & Gas, mainly due to increased activities in the Middle East and United States. We expect Mining & Metallurgy Segment EBIT(5) to remain in line with 2016 due to the persistent softer commodity prices, however we do expect an increase in Mining & Metallurgy’s revenue backlog(7).

This outlook is based on the assumptions and methodology described in the Company’s 2016 Management’s Discussion and Analysis under the heading, “How We Budget and Forecast Our Results”, which should be read in conjunction with the “Forward-Looking Statements” section below and is subject to the risks and uncertainties summarized therein, which are more fully described in the Company’s public disclosure documents. 

Quarterly Dividend
Given the Company’s long-term outlook, cash position and revenue backlog(7) level, the Board of Directors has increased the quarterly cash dividend by 5% to $0.273 per share, payable on March 30, 2017, to shareholders of record on March 16, 2017. This represents the 16th consecutive year that the Company’s dividend per share has been increased. This dividend is an “eligible dividend” for income tax purposes. 

Conference Call / Webcast
SNC-Lavalin will hold a conference call today at 3:00 p.m. EST to discuss the fourth quarter results. The telephone numbers to access the conference call are 1 800 263 0877 in North America, 647 794 1827 in Toronto, 438 968 3557 in Montreal, 080 0358 6377 in the United Kingdom, and 180 083 2679 in Ireland. A live audio webcast of the conference call and an accompanying slide presentation will be available at investors.snclavalin.com. A recording of the conference call will be available on our website within 24 hours following the call.

About SNC-Lavalin
Founded in 1911, SNC-Lavalin is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure. From offices in over 50 countries, SNC-Lavalin's employees are proud to build what matters. Our teams provide engineering, procurement, construction, completions and commissioning services together with a range of sustaining capital services to clients in four industry sectors, oil and gas, mining and metallurgy, infrastructure and power. SNC-Lavalin can also combine these services with its financing and operations and maintenance capabilities to provide complete end-to-end project solutions. www.snclavalin.com

(1) Adjusted net income from E&C is defined as net income attributable to SNC-Lavalin shareholders from E&C, excluding one-time net foreign exchange gains, charges related to restructuring, right-sizing and other, as well as amortization of intangible assets, the financing, acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014 and the loss on disposals of E&C businesses. E&C is defined in the Company’s 2016 financial statements and Management’s Discussion and Analysis. The term “Adjusted net income from E&C” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance. See reconciliation below.

(2) Adjusted diluted EPS from E&C is defined as the adjusted net income from E&C divided by the weighted average number of outstanding shares for the period.

(3) Adjusted net income from Capital is defined as net income attributable to SNC-Lavalin shareholders from Capital, excluding the gain on disposals of Capital Investments.

(4) Adjusted diluted EPS from Capital is defined as the adjusted net income from Capital divided by the weighted average number of outstanding shares for the period.

(5) Segment EBIT is defined herein as gross margin less i) directly related selling, general and administrative expenses; ii) corporate selling, general and administrative expenses that are directly related to projects or segments; and iii) non-controlling interests before taxes. Corporate selling, general and administrative expenses that are not directly related to projects or segments, restructuring costs, goodwill impairment, acquisition-related costs and integration costs and amortization of intangible assets related to the Kentz acquisition, as well as gains (losses) on disposals of E&C businesses and Capital investments are not allocated to the Company’s segments. The term “Segment EBIT” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance.

(6) Adjusted E&C EBITDA is defined herein as earnings from E&C before net financial expenses (income), income taxes, depreciation and amortization, and excludes one-time net foreign exchange gains, charges related to restructuring, right-sizing and other, as well as the acquisition-related costs and integration costs incurred in connection with the acquisition of Kentz in 2014 and the gains (losses) on disposals of E&C businesses and Capital investments. The term “Adjusted E&C EBITDA” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management uses this measure as a more meaningful way to compare the Company’s financial performance from period to period. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance. 

(7) Revenue Backlog is defined herein as a forward-looking indicator of anticipated revenues to be recognized by the Company, determined based on contract awards that are considered firm. In order to provide information that is comparable to the revenue backlog of other categories of activity, the Company limits the O&M activities revenue backlog, which can cover a period of up to 40 years, to the earlier of: i) the contract term awarded; and ii) the next five years. The term “Revenue backlog” does not have any standardized meaning under IFRS. Therefore, it may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s future performance.

 

SNC-Lavalin Financial Summary

 

(in thousands of Canadian dollars, unless
otherwise indicated)

Fourth Quarter

Year ended
December 31

 

2016

2015

2016

2015

 

 

 

 

 

Revenues

 

 

 

 

From E&C

2,146,484

2,590,297

8,223,085

9,363,508

From Capital

64,653

55,990

247,748

223,446

 

2,211,137

2,646,287

8,470,833

9,586,954

 

 

 

 

 


Net income attributable to
SNC-Lavalin shareholders

From E&C 

 


(38,435)

 

13,987

 


46,346

 

95,834

From Capital

40,011

35,257

209,187

308,502

 

1,576

49,244

255,533

404,336

 

 

 

 

 


Diluted EPS ($)

From E&C 
From Capital

 

(0.26)
0.27

 

0.09
0.24

 

0.31
1.39

 

0.64
2.04

 

0.01

0.33

1.70

2.68

 

 

 

 

 


Adjusted net income
attributable to SNC-Lavalin
shareholders

From E&C(1)
From Capital(3)

 

 

73,449
42,620

 

 

66,186
35,276

 

 

226,397
160,750

 

 

201,856
162,802

 

116,069

101,462

387,147

364,658

 

 

 

 

 

Adjusted diluted EPS ($)
From E&C(2)
From Capital(4)

 

0.49
0.28

 

0.44
0.23

 

1.51
1.07

 

1.34
1.08

 

0.77

0.67

2.58

2.42

 

Adjusted E&C EBITDA(6)
Adjusted E&C EBITDA margin

 

107,971
5.0%

 

144,831
5.6%

 

371,880
4.5%

 

433,377
4.6%

 

 

 

 

 

 

 

 

 

 

Revenue backlog(7)

 

 

10,677,400

11,991,900

 

 

 

 

 

Cash and cash equivalents

 

 

1,055,484

1,581,834

 

Reconciliation of IFRS Net Income as Reported to Adjusted Net Income

 

Net income (loss), as reported

Net charges related to the restructuring & right-sizing plan and other

Acquisition of Kentz

One-time net foreign exchange gain

Net loss (gain) on capital investment and E&C business disposals

Net income, adjusted

 

 

 

Acquisition-related costs and integration costs

Amortization of intangible assets

 

 

 

 

Fourth Quarter 2016
In M$

E&C

(38.4)

53.91

0.2

13.2

-

44.6

73.5

Capital

40.0

-

-

-

-

2.6

42.6

 

1.6

53.9

0.2

13.2

-

47.2

116.1

 

Per Diluted share ($)

E&C

(0.26)

0.36

0.00

0.09

-

0.30

0.49

Capital

0.27

-

-

-

-

0.01

0.28

 

0.01

0.36

0.00

0.09

-

0.31

0.77

 

Year Ended December 31, 2016
In M$

E&C

46.3

77.62

3.4

54.5

-

44.6

226.4

Capital

209.2

-

-

-

-

(48.5)

160.7

 

255.5

77.6

3.4

54.5

-

(3.9)

387.1

 

Per diluted share ($)

E&C

0.31

0.52

0.02

0.36

-

0.30

1.51

Capital

1.39

-

-

-

-

(0.32)

1.07

 

1.70

0.52

0.02

0.36

-

(0.02)

2.58

1 This amount includes a reversal of $8.5 million ($8.0 million after taxes) of charges, which did not meet the restructuring costs definition in accordance with IFRS. 

2 This amount includes a net reversal of $4.2 million ($6.0 million after taxes) of charges, which did not meet the restructuring costs definition in accordance with IFRS. 

 

 

Net income  as reported

Net charges related to the restructuring & right-sizing plan and other

Acquisition of Kentz

One-time net foreign exchange gain

Net gain on Capital investment disposals

Net income, adjusted

 

 

 

Acquisition-related costs and integration costs

Amortization of intangible assets

 

 

 

 

Fourth Quarter 2015
In M$

E&C

13.9

34.81

0.1

17.3

-

-

66.1

Capital

35.3

-

-

-

-

-

35.3

 

49.2

34.8

0.1

17.3

-

-

101.4

 

Per Diluted share ($)

E&C

0.09

0.23

0.00

0.12

-

-

0.44

Capital

0.24

-

-

-

-

-

0.24

 

0.33

0.23

0.00

0.12

-

-

0.68

 

Year Ended December 31, 2015
In M$

E&C

95.8

51.41

15.2

72.0

(32.6)

-

201.8

Capital

308.5

-

-

-

-

(145.7)

162.8

 

404.3

51.4

15.2

72.0

(32.6)

(145.7)

364.6

 

Per diluted share ($)

E&C

0.64

0.33

0.10

0.48

(0.21)

-

1.34

Capital

2.04

-

-

-

-

(0.96)

1.08

 

2.68

0.33

0.10

0.48

(0.21)

(0.96)

2.42

1 An expense related to the restructuring and right-sizing plan of $36.3 million ($36.3 million after taxes) originally included in the 2014 gross margin, in accordance with IFRS, was reversed in the fourth quarter of 2015 due to a favorable outcome. 

 

Forward-looking Statements:
Reference in this press release, and hereafter, to the “Company” or to “SNC-Lavalin” means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements.

Statements made in this press release that describe the Company’s or management’s budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be “forward-looking statements”, which can be identified by the use of the conditional or forward-looking terminology such as “aims”, “anticipates”, “assumes”, “believes”, “cost savings”, “estimates”, “expects”, “goal”, “intends”, “may”, “plans”, “projects”, “should”, “synergies”, “will”, or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses and future prospects; and ii) business and management strategies and the expansion and growth of the Company’s operations. All such forward-looking statements are made pursuant to the “safe-harbour” provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company’s current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

The 2017 outlook referred to in this press release is forward-looking information and is based on the methodology described in the Company’s 2016 Management’s Discussion and Analysis (“MD&A”) under the heading “How We Budget and Forecast Our Results” and is subject to the risks and uncertainties described in the Company’s public disclosure documents. The purpose of the 2017 outlook is to provide the reader with an indication of management’s expectations, at the date of this press release, regarding the Company’s future financial performance and readers are cautioned that this information may not be appropriate for other purposes.

Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company’s 2016 MD&A, particularly in the sections entitled “Critical Accounting Judgments and Key Sources of Estimation Uncertainty” and “How We Analyze and Report our Results” in the Company’s 2016 MD&A. The 2017 outlook also assumes that the federal charges laid against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. on February 19, 2015, will not have a significant adverse impact on the Company’s business in 2017. If these assumptions are inaccurate, the Company’s actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company’s assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to: (a) the outcome of pending and future claims and litigation could have a material adverse impact on the Company’s business, financial condition and results of operation; (b) on February 19, 2015, the Company was charged with one count of corruption under the Corruption of Foreign Public Officials Act (Canada)(the ”CFPOA”) and one count of fraud under the Criminal Code (Canada), and is also subject to other ongoing investigations which could subject the Company to criminal and administrative enforcement actions, civil actions and sanctions, fines and other penalties, some of which may be significant. These charges and investigations, and potential results thereof, could harm the Company’s reputation, result in suspension, prohibition or debarment of the Company from participating in certain projects, reduce its revenues and net income and adversely affect its business; (c) further regulatory developments could have a significant adverse impact on the Company’s results, and employee, agent or partner misconduct or failure to comply with anti-bribery and other government laws and regulations could harm the Company’s reputation, reduce its revenues and net income, and subject the Company to criminal and administrative enforcement actions and civil actions; (d) if the Company is not able to successfully execute on its strategic plan, its business and results of operations would be adversely affected; (e) a negative impact on the Company’s public image could influence its ability to obtain future projects; (f) fixed-price contracts or the Company’s failure to meet contractual schedule or performance requirements or to execute projects efficiently may increase the volatility and unpredictability of its revenue and profitability; (g) the Company’s revenue and profitability are largely dependent on the awarding of new contracts, which it does not directly control, and the uncertainty of contract award timing could have an adverse effect on the Company’s ability to match its workforce size with its contract needs; (h) the Company’s backlog is subject to unexpected adjustments and cancellations, including under “termination for convenience” provisions, and does not represent a guarantee of the Company’s future revenues or profitability; (i) SNC-Lavalin is a provider of services to government agencies and is exposed to risks associated with government contracting; (j) the Company’s international operations are exposed to various risks and uncertainties, including unfavourable political environments, weak foreign economies and the exposure to foreign currency risk; (k) there are risks associated with the Company’s ownership interests in Capital investments that could adversely affect it; (l) the Company is dependent on third parties to complete many of its contracts; (m) the Company’s use of joint ventures and partnerships exposes it to risks and uncertainties, many of which are outside of the Company’s control; (n) the competitive nature of the markets in which the Company does business could adversely affect it; (o) the Company’s project execution activities may result in professional liability or liability for faulty services; (p) the Company could be subject to monetary damages and penalties in connection with professional and engineering reports and opinions that it provides; (q) the Company may not have in place sufficient insurance coverage to satisfy its needs; (r) the Company’s employees work on projects that are inherently dangerous and a failure to maintain a safe work site could result in significant losses and/or an inability to obtain future projects; (s) the Company’s failure to attract and retain qualified personnel could have an adverse effect on its activities; (t) work stoppages, union negotiations and other labour matters could adversely affect the Company; (u) the Company relies on information systems and data in its operations. Failure in the availability or security of the Company’s information systems or in data security could adversely affect its business and results of operations; (v) any acquisition or other investment may present risks or uncertainties; (w) divestitures and the sale of significant assets may present risks or uncertainties; (x) a deterioration or weakening of the Company’s financial position, including its cash net of recourse debt, would have a material adverse effect on its business and results of operations; (y) the Company may have significant working capital requirements, which if unfunded could negatively impact its business, financial condition and cash flows; (z) an inability of SNC-Lavalin’s clients to fulfill their obligations on a timely basis could adversely affect the Company; (aa) the Company may be required to impair certain of its goodwill, and it may also be required to write down or write off the value of certain of its assets and investments, either of which could have a material adverse impact on the Company’s results of operations and financial condition; (bb) global economic conditions could affect the Company’s client base, partners, subcontractors and suppliers and could materially affect its backlog, revenues, net income and ability to secure and maintain financing; (cc) fluctuations in commodity prices may affect clients’ investment decisions and therefore subject the Company to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards, and may affect the costs of the Company’s projects; (dd) inherent limitations to the Company’s control framework could result in a material misstatement of financial information and; (ee) environmental laws and regulations expose the Company to certain risks, could increase costs and liabilities and impact demand for the Company’s services. The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that could cause the Company’s actual results to differ from current expectations, please refer to the sections “Risks and Uncertainties”, “How We Analyze and Report Our Results” and “Critical Accounting Judgments and Key Sources of Estimation Uncertainty” in the Company’s 2016 MD&A.

The forward-looking statements herein reflect the Company’s expectations as at the date of this press release and are subject to change after this date. The Company does not undertake any obligation to update publicly or to revise any such forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.