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Stuart Olson Reports Second Quarter 2017 Results and Declares Quarterly Dividend

CALGARY, Aug. 9, 2017 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced financial results for the second quarter and first six months of 2017, and declared a quarterly dividend of $0.12 per common share.

"Second quarter results met our expectations, and continued to strengthen quarter-to-quarter during this transition year for our business," said David LeMay, President and CEO of Stuart Olson. "Our Industrial Group is benefiting from recovering operating conditions following last year's Northern Alberta wildfires, as well as from increased activity on projects outside of Alberta. Buildings Group construction activity has ramped up as we expected in 2017 and we are realizing significant company-wide cost savings from our strategic efforts to align our business to market conditions. Our second quarter results reflect these positive influences."

"The second quarter also brought important new contract wins. The award of a high profile healthcare facility project to our Commercial Systems Group has highlighted the group's advanced capabilities and strengthened its backlog. Across the Company, our diversification into new end markets, geographies and capacities has also been rewarded with a number of strategic contract wins."

"While market conditions remain challenging in Alberta and the Commercial Systems Group results continue to reflect the impact of the slow rollout of infrastructure projects over the past year, 2017 is unfolding as expected and we are encouraged by our progress," concluded Mr. LeMay.


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(1) Adjusted EBITDA for the three and six months ended June 30, 2016 and 2017 is calculated based on the current definition. Please refer to the "Non-IFRS Measures" section of Stuart Olson's June 30, 2017 Management's Discussion and Analysis ("MD&A") for more information on the definition and calculation.

(2) Certain comparative results have been restated as a result of a change in intersegment eliminations accounting policy. Please refer to the section titled "Changes in Accounting Policies" in the June 30, 2017 MD&A and Note 2 of the June 30, 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 June 30, 2017 Management's Discussion & Analysis.


  • As at June 30, 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 Commercial Systems Group secured a number of contracts in Q2 2017 totaling approximately $110.0 million, including the Alberta healthcare facility award noted above. The group also established its entry into the Ontario market, securing its first project in the province.
    • The Buildings Group added $79.6 million of project awards and net scope increases to backlog in the quarter, including a mixed-use housing redevelopment infrastructure project in Alberta.
    • The Industrial Group achieved important strategic wins in the quarter, including a project in British Columbia in the growing water/wastewater sector, and an industrial project in Alberta that will involve fully self-performing all trades, including mechanical.
  • For the three months ended June 30, 2017, consolidated revenue increased by 8.5% to $246.4 million, from $227.1 million in Q2 2016.
    • Industrial Group revenue of $78.8 million increased by 6.9% from $73.7 million in Q2 2016, reflecting increased activity on a power project in Manitoba and a mining project in Ontario. It also reflects the absence of impacts from last year's wildfires in Northern Alberta. These gains were partially offset by reduced activity in the Alberta oil sands as a result of project owners deferring activity to later in 2017 and early 2018, as well as the completion in 2016 of a large mining project in the Northwest Territories that contributed significant revenue to Q2 2016 results.
    • Buildings Group revenue grew by 26.8% to $136.7 million, from $107.8 million in Q2 2016. The significant improvement was achieved as projects in Alberta and Ontario moved into higher activity construction phases during the quarter.
    • Commercial Systems Group revenue was $39.9 million, compared to $51.3 million in Q2 2016. The 22.2% reduction reflects delays in the rollout of new infrastructure opportunities, as well as the completion of a large project in Alberta that contributed significant revenue to the same period last year. These impacts were partially offset by increased activity in British Columbia during the Q2 2017 period.
  • On a consolidated basis, second quarter 2017 contract income was $20.6 million (contract income margin of 8.4%), compared to $21.5 million (contract income margin of 9.5%) in Q2 2016.
    • Industrial Group contract income increased 17.7% to $7.3 million, from $6.2 million in Q2 2016. This improvement reflects higher revenue together with an increase in the contract income margin to 9.3% from 8.4% last year. Industrial Group margin benefited from a year-over-year reduction in restructuring charges and the cost savings realized as a result of the realignment of the business undertaken last year.
    • Buildings Group second quarter contract income was $9.2 million, compared to $9.7 million in Q2 2016, and contract income margin declined to 6.7% from 9.0%. Changes in project mix and project stage of completion were key factors in these results. Results from Q2 2016 included additional profit recognized on two significant projects that were in final completion phases.
    • Commercial Systems Group contract income was $4.1 million, compared to $5.6 million last year and contract income margin was 10.3% as compared to 10.9% in Q2 2016. The change in contract income margin reflects competitive pricing pressures on new projects, changes in project mix and stage of completion and reduced economies of scale resulting from lower activity levels.
  • Second quarter adjusted EBITDA was $7.1 million (adjusted EBITDA margin of 2.9%), similar to the $7.2 million (adjusted EBITDA margin of 3.2%) generated in Q2 2016.
  • Net earnings increased to $0.5 million (diluted earnings per share of $0.02), from a net loss of $3.5 million (diluted loss per share of $0.13) in the second quarter of 2016. The increase in net earnings primarily reflects the absence of significant restructuring costs incurred in Q2 2016.
  • Adjusted free cash flow improved to an outflow of $0.1 million in Q2 2017, from an outflow of $5.4 million in the same period last year. This $5.3 million improvement reflects lower capital expenditures and tax payments, together with the year-over-year increase in net earnings.
  • Stuart Olson ended the period with a cash balance of $21.9 million and additional borrowing capacity of approximately $49.1 million.
  • On July 20, 2017, Stuart Olson negotiated an increase of 0.25 to the Company's debt to EBITDA financial covenant ratio, such that it shall not exceed 3.25:1.00. This amendment is expected to expand available borrowing capacity, if needed, to fund operations, finance capital expenditures and support growth strategies.
  • On August 9, 2017, the Board of Directors ("Board") 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 October 17, 2017 to shareholders of record on September 29, 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. 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 increased activity levels, the benefits of savings realized from the strategic realignment of the Company's businesses in 2016, together with the anticipated absence of 2016's wildfire impacts. Adjusted EBITDA margin is expected to decline slightly as a result of investments in organic growth initiatives, competitive pricing pressure in Alberta and an increase in performance 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 the Company begins to see a gradual improvement in market conditions. 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 the mining sector in Ontario. Industrial Group adjusted EBITDA is expected to be meaningfully higher year-over-year, with an adjusted EBITDA margin as a percentage of revenue that is expected to be modestly higher. 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 slightly 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 will hold a conference call and webcast to discuss its 2017 second quarter results on Thursday, August 10, 2017 at 7:00 a.m. Mountain Time (9:00 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 Thursday, August 24, 2017 by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 947127. The public is invited to listen to the live conference call, webcast or the replay.


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. Moving forward, Stuart Olson does not expect intersegment eliminations to materially impact adjusted EBITDA in any period.

Further information on this change, please refer to the Q2 2017 Management's Discussion and Analysis, in the section titled "Changes in Accounting Policy" and Note 2 of the June 30, 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 in 2017 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 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 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;


the recovery of the Alberta energy industry and Stuart Olson's customers from the impacts of the 2016 wildfire crisis in Alberta and the non-occurrence of similar unexpected events; 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: