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Stuart Olson Reports Third Quarter 2017 Results and Declares Quarterly Dividend

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

"We achieved improved third quarter performance as our strategic initiatives gained traction," said David LeMay, President and CEO of Stuart Olson. "The diversification of our business both geographically and across end-markets helped contribute to the 20.8% year-over-year increase in third quarter revenue, with the majority of our growth coming from projects outside of Alberta. Third quarter adjusted free cash flow and enhanced working capital efficiency improved both our balance sheet leverage and liquidity metrics, and we are pleased to see our dividend payout ratio continue to strengthen, as planned."

"While conditions in the Alberta market are still challenging, we are encouraged by the positive results in all groups and the record backlog achieved by our Commercial Systems Group, which includes a diverse range of projects from Ontario to British Columbia. All three of our operating groups continue to actively bid on a robust pipeline of projects across our regions as we execute the 2017 transition year as expected and prepare for 2018 and beyond."


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(1) Adjusted EBITDA for the three and nine months ended September 30, 2016 and 2017 is calculated based on the
current definition. Please refer to the "Non-IFRS Measures section of Stuart Olson's September 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 the intersegment eliminations accounting
policy. Please refer to the "Changes in Accounting Policies" section in the September 30, 2017 MD&A and Note 2 of the
September 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 September 30, 2017 Management's Discussion & Analysis.


  • For the three months ended September 30, 2017, consolidated revenue increased by 20.8% to $268.1 million, from $221.9 million in Q3 2016.

    • Industrial Group revenue increased by 36.7% to $93.2 million, from $68.2 million in Q3 2016. The $25.0 million improvement reflects increased activity on a power project in Manitoba and a mining project in Ontario. These gains were partially offset by the completion in 2016 of a large mining project in the Northwest Territories that contributed significant revenue to Q3 2016 results.

    • Buildings Group revenue grew by 31.2% to $142.5 million, from $108.6 million in Q3 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 $45.8 million, compared to $50.8 million in Q3 2016. The 9.8% reduction reflects a shift in project stage of completion with recently awarded infrastructure projects in early stages of activity during the current period. By contrast, Q3 2016 results included significant revenue related to the completion of a large project in Alberta. These impacts were partially offset by increased Commercial Systems Group activity in Manitoba and Ontario during the Q3 2017 period.

  • On a consolidated basis, third quarter 2017 contract income increased 14.9% to $28.5 million (contract income margin of 10.6%), compared to $24.8 million (contract income margin of 11.2%) in Q3 2016.

    • Industrial Group contract income increased 21.2% to $12.6 million, from $10.4 million in Q3 2016. This improvement reflects higher revenue, cost savings realized as a result of last year's strategic realignment of the business, and a year-over-year reduction in related restructuring charges. Industrial Group margin was 13.5% compared to 15.2% in Q3 2016. Results from Q3 2016 included additional profit from the release of contingencies on two significant projects that were in final completion stages during that period.

    • Buildings Group contract income increased 3.1% to $10.0 million, from $9.7 million during the same period in 2016. Contract income margin declined to 7.0% from 8.9%. This is the result of a large number of projects currently being in earlier stages of construction, which involve higher activity levels, but reflect more conservative margins until risks are appropriately mitigated.

    • Commercial Systems Group contract income climbed 25.5% to $5.9 million (contract income margin of 12.9%), from $4.7 million (contract income margin of 9.3%) last year. The significant improvement in contract income and margin reflects customer-driven productivity challenges on a large project that negatively impacted the group's Q3 2016 results that did not repeat in Q3 2017.

  • Third quarter adjusted EBITDA increased 17.0% to $11.7 million (adjusted EBITDA margin of 4.4%), from $10.0 million (adjusted EBITDA margin of 4.5%) generated in Q3 2016.

  • Net earnings increased 56.5% to $3.6 million (diluted earnings per share of $0.11), from $2.3 million (diluted earnings per share of $0.08) in the third quarter of 2016. The significant increase in net earnings primarily reflects the after-tax improvement in adjusted EBITDA.

  • Adjusted free cash flow improved to $10.0 million in Q3 2017, from $4.4 million in the same period last year. This $5.6 million improvement was driven primarily by higher year-over-year adjusted EBITDA, lower capital expenditures, together with the settlement of provisions in Q3 2016 that did not repeat in 2017.

  • Stuart Olson ended the period with a cash balance of $31.2 million and additional borrowing capacity of approximately $70.7 million, providing the Company with combined liquidity of $101.9 million. This reflects an increase of $27.5 million or 36.9% compared to combined liquidity of $74.4 million ($31.5 million of cash, $42.9 million of available borrowing capacity) as at December 31, 2016.

  • The Company's net long-term indebtedness to adjusted EBITDA ratio improved to 2.4x from 2.5x at September 30, 2016, reflecting the use of adjusted free cash flow and cash collected from working capital to repay indebtedness under Stuart Olson's Revolving Credit Facility ("Revolver").

  • As previously reported, on July 20, 2017, Stuart Olson negotiated an increase of 0.25 to the Company's Revolver debt to EBITDA financial covenant ratio effective for Q3 2017, 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.

  • As at September 30, 2017, Stuart Olson's backlog was $1.8 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.

    • Commercial Systems Group backlog grew to a record $248.6 million, reflecting the award of numerous small projects in the quarter, including projects in its new Ontario market.

  • On November 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 January 16, 2018 to shareholders of record on December 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 the Industrial Group and Buildings Group below.

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. These benefits are expected to be partially offset by investments in organic growth initiatives, competitive pricing pressure in Alberta and an anticipated increase in performance plan accruals associated with the expected improvement in consolidated financial results. As a result of the increases in revenue and adjusted EBITDA outlined above, adjusted EBITDA margin is expected to remain relatively stable with 2016 levels.

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

  • Revenue from the Industrial Group is expected to be modestly higher in 2017 than in 2016, supported by increased activity on projects outside of Alberta. This includes work on a new site for an existing mining customer in Saskatchewan and continued work for customers in Manitoba's power sector and Ontario's mining sector. Industrial Group adjusted EBITDA and adjusted EBIDTA 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. It also reflects a shift in project stage of completion with a number of industrial projects moving towards final stages in 2017.

  • The Buildings Group anticipates higher revenue in 2017 with a greater proportion of contracts moving from pre-construction into construction phases. Buildings Group revenue as a whole will 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 the higher revenue. Adjusted EBITDA margin is expected to be slightly lower year-over-year, reflecting a change in project stage of completion.

  • Commercial Systems Group 2017 revenue is expected to be lower than in 2016, reflecting the shift in project stage of completion, with recently awarded projects in early stages of activity in the current year. The group's revenue outlook also reflects the reduced level of building maintenance work and short-term duration project opportunities available in 2017 as compared to last year.  Adjusted EBITDA is expected to be slightly lower than in 2016 due to lower revenue. Adjusted EBITDA margin is expected to remain stable year-over-year.

Stuart Olson will hold a conference call and webcast to discuss its 2017 third quarter results on Friday, November 10, 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 Friday, November 24, 2017 by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 918975. 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 operating 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 Q3 2017 Management's Discussion and Analysis, in the section titled "Changes in Accounting Policy" and Note 2 of the September 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 operating 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: