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Stuart Olson Reports First Quarter 2017 Results and Declares Quarterly Dividend

CALGARY, May 2, 2017 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the first quarter of 2017, and declared a quarterly dividend of $0.12 per common share.

"Our first quarter 2017 results were in line with our expectations as market conditions transition from the challenges of 2016 to what we forecast to be a more stable 2018," said David LeMay, President and CEO of Stuart Olson. "While conditions in the Alberta market continued to present challenges for the Industrial Group and Commercial Systems Group, our Buildings Group achieved performance improvements with increases in revenue and adjusted EBITDA. Our efforts to proactively align our business to market conditions also translated into G&A savings across the Company, helping to improve year-over-year adjusted free cash flow."

"Going forward, we expect to see consolidated results improving quarter to quarter as conditions in the oil and gas sector stabilize and as some of our newer Buildings Group and Commercial Systems Group projects move into higher activity construction phases.  Supported by our $1.9 billion backlog, our continued diversification into new end-markets, geographies and capacities, and our lean, flexible cost structure, we are on track to achieve steady improvements in our 2017 financial results," added Mr. LeMay.  


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(1) Adjusted EBITDA for the three months ended March 31, 2016 and 2017 is calculated based on Stuart Olson's current definition. Please refer to the "Non-IFRS Measures" section of Stuart Olson's March 31, 2017 Management's Discussion & Analysis ("MD&A") for more information on its definition and calculation.

(2) Certain comparative results have been restated as a result of a change in the intersegment eliminations accounting policy. Please refer to the section titled "Changes in Accounting Policies" in the March 31, 2017 MD&A and Note 2 of Stuart Olson's March 31, 2017 Condensed Consolidated Interim Financial Statements for further information.


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", "adjusted EBITDA", "adjusted EBITDA margin", "backlog", "working capital", "adjusted free cash flow" and "adjusted free cash flow per share", are not prescribed measures under IFRS. For a description of these measures, see the "Non-IFRS Measures" section in Stuart Olson's March 31, 2017 Management's Discussion & Analysis.


  • As at March 31, 2017, Stuart Olson's backlog was $1.9 billion and included a diverse mix of public, private and industrial projects from Ontario to British Columbia. The backlog is predominantly made up of low-risk contract arrangements.
    • The Industrial Group added a five-year maintenance, repair and operations ("MRO") contract to backlog, valued at an estimated $30.0 million. The contract is with a longstanding mining customer on a new project site in Saskatchewan.
    • The Commercial Systems Group secured a number of contracts in Q1 2017 totaling approximately $35.0 million, including an award for a large private mixed-use tower project in Alberta.
  • For the three months ended March 31, 2017, Stuart Olson generated consolidated revenue of $220.1 million, compared to $245.5 million in Q1 2016, a year-over-year decline of 10.3%.  
    • Industrial Group revenue of $62.4 million declined 33.0% year-over-year, reflecting reduced activity in the Alberta oil sands and the completion in 2016 of a large mining project in the Northwest Territories that contributed significant revenue to Q1 2016 results. These impacts were partially offset by increased activity on a power project in Manitoba and a mining project in Ontario.
    • Buildings Group revenue grew by 28.9% to $126.1 million, from $97.8 million in Q1 2016. The significant improvement was achieved as a result of changes in project stage of completion, with projects in Alberta and Ontario moving into higher activity construction phases during the Q1 2017 period.
    • Commercial Systems Group revenue was $42.3 million, compared to $58.0 million in Q1 2016. The 27.1% reduction reflects delays in the rollout of new infrastructure opportunities, as well as the completion of a number of larger projects in Alberta that contributed significant revenue to the period last year. These impacts were partially offset by increased activity in British Columbia during the 2017 period.
  • On a consolidated basis, first quarter 2017 contract income was $20.1 million (contract income margin of 9.1%), compared to $25.9 million (contract income margin of 10.5%) in Q1 2016.
    • The Industrial Group reported contract income of $5.8 million, compared to $8.4 million last year. The year-over-year change reflects lower revenue, partially offset by a higher contract income margin. Contract income margin from the Industrial Group increased to 9.3% from 9.0% as last year's restructuring initiatives contributed to cost savings this year, and the costs incurred in 2016 to implement these initiatives did not repeat in Q1 2017.
    • Buildings Group first quarter contract income increased 12.1% to $10.2 million, from $9.1 million in Q1 2016, supported by higher revenues. Contract income margin decreased to 8.1% from 9.3%, reflecting a change in project mix and project stage of completion. In particular, Q1 2016 results benefitted from additional profit as several significant projects moved into completion phases.
    • Commercial Systems Group contract income was $4.1 million, compared to $8.4 million last year and contract income margin declined to 9.7% from 14.5%. The change in contract income margin reflects competitive pricing pressures on new projects, as well as changes in project mix and stage of completion. It also reflects a decline in benefits associated with economies of scale as a result of the lower revenue level in Q1 2017.
  • First quarter adjusted EBITDA was $5.7 million (adjusted EBITDA margin of 2.6%), compared to $9.1 million (adjusted EBITDA margin of 3.7%) last year. The change in adjusted EBITDA primarily reflects the lower contract income, partially offset by lower administrative costs (before depreciation, amortization and restructuring costs excluded from the calculation of adjusted EBITDA).
  • The Company reported a Q1 2017 net loss of $0.2 million (diluted loss per share of $0.01), compared to net earnings of $0.7 million (diluted earnings per share of $0.03) in the first quarter of 2016, reflecting the after-tax impact of lower adjusted EBITDA.
  • First quarter adjusted free cash flow improved to an inflow of $3.7 million, from an outflow of $0.1 million in 2016. The improvement reflects a change in provisions due to ordinary warranty costs recognized on two large projects that reached substantial completion this quarter, together with lower tax payments, partially offset by lower adjusted EBITDA.
  • Stuart Olson ended the first quarter of 2017 with a cash balance of $25.6 million and additional borrowing capacity of approximately $36.9 million.
  • On March 20, 2017, the Company announced the appointment of John Krill as President and Chief Operating Officer of the Commercial Systems Group. Mr. Krill brings over 30 years' experience in the Canadian commercial and industrial sectors and previously served as the Chief Operating Officer of a large integrated multi-trade company.
  • On May 2, 2017, the Board of Directors declared a quarterly common share dividend of $0.12 per share. The dividend is designated as an eligible dividend under the Income Tax Act (Canada) and is payable July 13, 2017 to shareholders of record on June 30, 2017.



Please note that as a result of a change to Stuart Olson's intersegment eliminations accounting policy in 2017, the following outlook reflects a comparison of anticipated 2017 results to restated 2016 results. Moving forward, Stuart Olson does not expect intersegment eliminations to materially impact adjusted EBITDA in any period. Please see the section titled "Restatement of Comparative Results" below for more detail.

Stuart Olson expects 2017 consolidated revenue to be meaningfully higher than in 2016 based on the outlook for its three business groups as outlined below. On a consolidated basis, adjusted EBITDA is expected to be modestly higher than the restated 2016 results, primarily reflecting the anticipated absence of 2016's wildfire impacts, together with the benefits of savings realized from the 2016 restructuring initiatives. Adjusted EBITDA margin is expected to decline slightly as a result of investments in organic growth initiatives and an increase in incentive plan accruals associated with the expected improvement in consolidated financial results.

Stuart Olson's outlook by business group is as follows:

  • Revenue from the Industrial Group is expected to be higher in 2017 than in 2016 as oil sands operators recover from the fire-related disruptions that hampered 2016 operations and due to modest expected improvements in market conditions in 2017. This, in turn, should enhance the ability of the Industrial Group to execute on its growing volume of MRO contracts. Industrial Group 2017 revenue will also be supported by the execution of industrial projects outside of Alberta, including work on a new site for an existing mining customer in Saskatchewan, as well as continued work in the power sector in Manitoba and a mining sector in Ontario. Industrial Group adjusted EBITDA and adjusted EBITDA margin are expected to be meaningfully higher year-over-year. This reflects the expectation that productivity challenges and additional costs incurred during and following the 2016 wildfire crisis will not repeat in 2017.
  • The Buildings Group anticipates higher revenue in 2017 as a greater proportion of contracts move from pre-construction into construction phases. Buildings Group revenue as a whole is expected to continue to be supported by predominantly public projects in multiple provinces, including the group's growing activity in Ontario. Buildings Group adjusted EBITDA is expected to be modestly higher year-over-year as a result of higher revenue. Adjusted EBITDA margin is expected to be similar year-over-year.
  • Commercial Systems Group 2017 revenue is expected to be slightly lower than 2016 levels, reflecting the continued slow rollout of new projects as a result of delayed infrastructure stimulus and a reduced level of available building maintenance work, and short-term duration project opportunities. Adjusted EBITDA and adjusted EBITDA margin are expected to be modestly lower than in 2016 due to competitive pricing pressures affecting projects currently in backlog as well as projects expected to be secured in the remainder of 2017.


Stuart Olson revised its intersegment eliminations accounting policy in 2017 to improve the predictability of results for financial statement users. As a result of this change, certain comparative results have been restated. In addition, the Company's outlook reflects a comparison of anticipated 2017 results to restated 2016 results, which differ from results previously reported for periods ending prior to 2017. This change in policy impacts the results Stuart Olson previously reported under intersegment eliminations and, correspondingly, its consolidated results. The change does not impact any result previously reported by any of Stuart Olson's business groups, and does not change group accounting moving forward.

For further information on this change, please refer to the Q1 2017 Management's Discussion and Analysis, in the section titled "Changes in Accounting Policy" and Note 2 of the March 31, 2017 Condensed Consolidated Interim Financial Statements. These documents can be found on the Company's website at

In addition to the change in policy, Stuart Olson also modified its definition of adjusted EBITDA to exclude equity-settled share-based compensation expense. The Company uses adjusted EBITDA as a proxy for cash operating performance, and equity-settled share-based compensation is a non-cash expense reflected in operating results for accounting purposes under IFRS.


Stuart Olson will hold a conference call and webcast to discuss its 2017 first quarter results on Wednesday, May 3, 2017 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 the Company's website at For those unable to listen during the live webcast, a replay will be available on the 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 Wednesday, May 17, 2017 by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 188690. The public is invited to listen to the live conference call, webcast or the replay.


Stuart Olson Inc. provides general contracting and electrical building systems contracting in the public and private construction markets as well as electrical, mechanical and specialty trades, such as insulation, cladding and asbestos abatement, in the industrial construction and services market. The Company operates office locations and projects throughout Western Canada, Ontario and the territories. Stuart Olson's common shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols "SOX" and "SOX.DB.A", respectively.


This press release contains certain statements that may constitute forward-looking information within the meaning of applicable securities laws. This forward-looking information includes, without limitation, the statements relating to:


relating to previously completed restructuring initiatives, and the expectation that these initiatives will achieve cost savings going forward; and


made under the section titled "Outlook" including, without limitation, those relating to:


revenue visibility;


Stuart Olson's backlog and the implication that such backlog will be converted into revenues and whether it provides line of sight to activity levels into 2018 and 2019;


2017 EBITDA and EBITDA margin projections;


economic conditions; and


the outlook for each of Stuart Olson's business groups.


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. 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 filed with the securities regulatory authorities in Canada 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: