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Stuart Olson Reports First Quarter 2015 Results and Declares Quarterly Dividend

Revenue and EBITDA Increase; Strong $2.1B Backlog

CALGARY, May 5, 2015 /CNW/– Stuart Olson Inc. (TSX: SOX, SOX.DB, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the first quarter of 2015 and declared a quarterly dividend of $0.12 per common share.

"We achieved higher first quarter revenue and EBITDA this year than in 2014, as we executed on our backlog and maintained tight cost control throughout our operations," said David LeMay, President and CEO of Stuart Olson. "The maintenance, repair and operations (MRO) component of our industrial business, which currently represents approximately 50% of our industrial backlog, is thriving and we are working to capitalize on additional opportunities.  However, weaker oil prices have impeded demand for new industrial construction and have lowered margins on those projects that are proceeding. To partially offset this impact, we are pursuing a number of industrial project opportunities outside of Alberta. In terms of the commercial and infrastructure construction market, we continue to see a steady pipeline of project opportunities, both in and outside of Alberta. We ended the quarter with a very strong $2.1 billion backlog, which reflects the addition of our newly acquired Studon business and provides us with excellent revenue visibility for 2015 and 2016."

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(1) The convertible debentures issued in 2010, and due June 30 2015, are presented as a current liability

of $85.6 million as at March 31, 2015 (December 31, 2014 - $84.8 million).

(2) If the convertible debentures issued in 2010 were excluded from working capital, adjusted March 31, 2015

working capital would have been $95.1 million (December 31, 2014 - $139.2 million).

(3) Three month ended March 31, 2014 results have been restated to reflect Broda as discontinued operations.

These financial results are presented in conformance with International Financial Reporting Standards ("IFRS"). All figures are in Canadian dollars unless otherwise noted. Certain financial and operational measures referred to in this press release, including "contract income margin", "EBITDA", "EBITDA margin", "backlog", and "working capital", are not prescribed measures under IFRS. For a description of these measures, see the "Non-IFRS Measures" section in Stuart Olson's Q1 2015 Management's Discussion & Analysis.

First Quarter 2015 Overview

  • On January 6, 2015, we completed the purchase of Studon Electric & Controls Inc. ("Studon") for estimated closing consideration of $68.9 million, subject to finalization, comprised of $62.3 million in cash and $6.6 million in common shares. The purchase price may be further increased by earn-out payments up to a maximum of $22.3 million based on Studon's performance from the beginning of 2015 to the end of 2017.
  • Backlog of $2.1 billion as at March 31, 2015 consists of approximately 86.7% low-risk contracts, including 59.9% construction management ("CM") work and 26.8% cost-plus arrangements. Tendered (hard-bid) work represents approximately 13.3% of the backlog.
  • Consolidated revenue increased 5.4% to $282.9 million in the first quarter of 2015, from $268.5 million in Q1 2014.
    • Buildings Group revenue increased by 14.3% to $153.3 million, supported by increased institutional construction activity in Alberta and Manitoba. 
    • Industrial Group revenue declined by 2.7% to $82.3 million, reflecting the benefit in Q1 2014 of a large one-time oil sands construction project that in Q1 2015 was in its final stages and significant modular work in Q1 2014 that did not repeat in 2015, partially offset by the additional revenue added as part of the Studon acquisition.
    • Commercial Systems Group revenue decreased by 5.3% to $56.9 million, reflecting changes in project mix and stage of completion in the current period.
  • Consolidated contract income decreased 7.8% to $24.9 million and consolidated contract income margin declined to 8.8% from 10.1%, primarily reflecting decreased margins from the Buildings Group and Industrial Group.
  • First quarter EBITDA increased 19.1% to $10.6 million, from $8.9 million in Q1 2014. The EBITDA improvement reflects administrative cost savings in the Corporate Group and Buildings Group.
  • Net earnings from continuing operations were $1.0 million (diluted earnings per share of $0.04), compared to $1.3 million (diluted earnings per share of $0.05) in Q1 2014. This marginal decline reflects the double interest carry associated with two convertible debentures being outstanding until June 2015, when the 2010 convertible debentures will be repaid using the proceeds raised from the 2014 convertible debenture issue, and increased amortization associated with the intangibles recorded as part of the Studon acquisition, partially offset by the improvement in EBITDA.
  • First quarter net earnings increased to $1.0 million (diluted earnings per share of $0.04), a $1.6 million improvement compared to the net loss of $0.6 million (diluted loss per share of $0.02) in Q1 2014. Results from a year ago included a $1.9 million loss from discontinued operations related to our former Broda business, which did not repeat in 2015.
  • As at March 31, 2015, the Company was in full compliance with its long-term debt covenants, had available cash of $63.9 million and additional borrowing capacity of approximately $155.2 million.
  • Subsequent to the quarter end, Stuart Olson's Board of Directors declared a quarterly dividend of $0.12 per common share. The dividend will be paid on July 15, 2015 to shareholders of record on June 30, 2015. The Company has a dividend reinvestment plan in place; details are available on Stuart Olson's website (


Stuart Olson's outlook for 2015 anticipates consolidated revenue to be in line with overall 2014 revenue, while EBITDA and EBITDA margin are expected to increase. This outlook is based on the Company's $2.1 billion backlog, which provides line of sight to activity levels for 2015 and into 2016. Both the Buildings Group and the Commercial Systems Group will be executing large backlogs dominated by public infrastructure projects distributed across multiple provinces. The majority of these projects are underway and are expected to be completed.

The Industrial Group will benefit from the addition of Studon, which was acquired on January 6, 2015 and added approximately $157.0 million of backlog on closing to the group's existing December 31, 2014 backlog of $340.6 million. In addition, the Company anticipates continued strong demand for MRO services in 2015, and estimates that approximately 50% of the Industrial Group's backlog is comprised of these stable and recurring services. Opportunities for new industrial construction projects in Alberta are expected to be weaker in 2015 than in 2014, as a result of lower expected oil prices. However, industrial projects that have been secured and opportunities that are being pursued in other parts of Canada are expected to mitigate this risk.

Overall, the Company expects market conditions in Alberta will be challenging for the remainder of 2015, particularly in terms of increased competition for fewer industrial and commercial construction project opportunities. However, we continue to see good opportunities for infrastructure projects, with Western Canadian provincial governments expected to maintain infrastructure spending at stable levels. Economic conditions are also expected to remain healthy in British Columbia, Manitoba and Ontario, providing opportunities for Stuart Olson's operations in these provinces. Supported by a large backlog, the Company will continue to manage its business tightly, focusing on cost control and project execution to ensure its financial objectives are achieved in 2015.

Stuart Olson's outlook for its three business groups is as follows:

  • The Buildings Group anticipates lower revenue, but higher EBITDA and EBITDA margin in 2015 as a result of significantly reduced exposure to higher-risk industrial site projects.
  • In 2014, the Industrial Group benefited significantly from a one-time large construction project that is now in its final stages. This factor, combined with the expected decline in new industrial construction opportunities in Alberta, will likely result in 2015 revenue from the legacy Industrial Group businesses being lower than the levels achieved in 2014. The Studon business also anticipates a year-over-year reduction in revenue as a result of the decline in industrial construction opportunities. Industrial Group EBITDA margins are also expected to be lower as a result of increased competition, oil sands operators seeking supplier cost reductions in response to lower oil prices, and an increased proportion of lower-risk cost reimbursable work in the revenue mix. The Company expects the impact of low oil prices to be felt through much of 2015, given owner delays in moving forward with new projects as they assess their own capital budgets.
  • Commercial Systems Group revenue and EBITDA margin for 2015 are expected to be similar to 2014 results.

Stuart Olson will hold a conference call and webcast to discuss its first quarter 2015 results tomorrow, May 6, 2015 at 7:30 a.m. Mountain Time (9:30 a.m. Eastern). The webcast will be broadcast live and will also be available for replay in the Presentations & Events subsection under Investor Relations on our website at For those unable to listen during the live webcast, a replay will be available on Stuart Olson's website shortly after the conclusion of the conference call for a period of 90 days. Financial analysts and institutional investors who wish to ask questions during the conference call are invited to call 1-888-390-0546 (Canada and USA) or 1-587-880-2171 (outside Canada and USA). For those unable to participate on the live call, a replay will be made available until May 27, 2015, by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 156299. The public is invited to listen to the live conference call, webcast or the replay.

About Stuart Olson Inc.

Stuart Olson Inc. provides building construction, commercial and industrial electrical contracting, and industrial insulation services to an array of public and private sector clients. The Company operates office locations throughout British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stuart Olson common shares and Stuart Olson's 2010 and 2014 convertible debentures are listed on the Toronto Stock Exchange under the symbols "SOX", "SOX.DB" and "SOX.DB.A", respectively.

Forward Looking Information

This press release contains certain statements that may constitute forward-looking information within the meaning of applicable securities laws. Often, but not always, forward-looking information can be identified by the use of such words as "may", "will", "expect", "believe", "plan", "intend", "estimate", "outlook", "forecast", "should", "anticipate" and other similar terminology, including statements concerning possible or assumed future results. This forward-looking information in this press release includes, without limitation, the statements related to Stuart Olson's expectations regarding: (a) 2015 revenue visibility and generation, 2015 EBITDA margin realization and 2015 backlog mix and execution; (b) all of those statements under the heading entitled "Outlook" relating to expected economic conditions, including oil prices forecasts; and (c) general business opportunities. Forward-looking information is based on management's reasonable assumptions, analysis and estimates in respect of its experience and perception of trends, current economic conditions, government policies and expected developments, as well as other material factors that it considers to be relevant at the time of making such statements.

The forward-looking information in this press release is included solely for the purpose of assisting investors in understanding the Company's financial position and the results of its operations as at the date hereof. By its nature, forward-looking information involves known and unknown risks and uncertainties, which give rise to the possibility that management's assumptions, analysis and estimates will be incorrect and that the Company's anticipated results will not be achieved. Although the Company believes that the statements with respect to forward-looking information are reasonable and current, such statements should not be interpreted as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. Forward-looking information is necessarily subject to a number of factors that may cause actual results to differ materially from those results implied by the expectations suggested by such information. Those factors include, without limitation, the risks and uncertainties described in the Company's Annual Information Form available under the Company's profile at Readers are encouraged to consider the foregoing risks and other factors carefully when evaluating the forward-looking information and are cautioned not to place undue reliance upon such information when making investment decisions.

The forward-looking information in this press release is current to the date hereof, and is subject to change following such date. While the Company may elect to do so, unless required by applicable law, it undertakes no obligation to update this information to reflect new information or circumstances at any particular time.

SOURCE Stuart Olson Inc.

For further information: David LeMay, President and Chief Executive Officer, Stuart Olson Inc., (403) 685-7777, Email:; Daryl Sands, Executive Vice President and Chief Financial Officer, Stuart Olson Inc., (403) 685-7777, Email: