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Stuart Olson Reports Fourth Quarter and Full Year 2018 Results

Added approximately $825 million to consolidated backlog in 2018
Maintained balance sheet with healthy liquidity and leverage metrics
Amended revolving credit facility to allow for additional financial flexibility
Quarterly dividend reduced to $0.06 per common share to support future growth

CALGARY, March 5, 2019 /CNW/ - Stuart Olson Inc. (TSX: SOX, SOX.DB.A) ("Stuart Olson" or the "Company") today announced fourth quarter and full-year 2018 financial results, and declared its 32nd consecutive quarterly dividend.

"Against a backdrop of increased competition and a significant spending slowdown across our key Western Canadian markets due to historically wide oil price differentials, Stuart Olson added approximately $825 million to its consolidated backlog, acquired an accretive complementary mechanical MRO provider, and maintained a healthy balance sheet in 2018," said David LeMay, President and CEO of Stuart Olson.

"While these accomplishments were offset by weak financial results for the fourth quarter, we enter 2019 with a positive outlook for contract revenue and adjusted EBITDA growth on a full-year basis, with much of this growth expected to come in the second half of the year. This is due to a number of factors, including our current project mix and stage of completion, the near-term negative impacts of the mandatory Alberta oil production curtailment on capital spending by our integrated oil sands customers, which are abating, and the fact that our operating groups are actively bidding on a significant number of federal and provincial infrastructure projects."

"In pursuit of these opportunities, and consistent with our strategy of diversifying our project delivery model to include larger design-build projects and projects with increasing scope and scale, we have decided to reduce the quarterly dividend to $0.06 per share," said Mr. LeMay. "This will bring the company's dividend metrics more in line with our peers while giving us a stronger balance sheet and improving our ability to win major new projects, pursue growth opportunities and create shareholder value."

"I am also pleased to report that with the unanimous support of our lenders, we recently amended our revolving credit facility to provide us with the ability to use this facility, should we choose to do so, to settle the repayment of our 2014 Convertible Debentures, which mature at the end of 2019," added Mr. LeMay. "This amendment provides additional financial flexibility and further supports our positive outlook for 2019."


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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", "adjusted free cash flow per share", "dividend payout ratio", "additional borrowing capacity", "available liquidity" and "net long-term indebtedness to adjusted EBITDA", are not prescribed measures under IFRS. For a description of these measures, see the "Non-IFRS Measures" section in Stuart Olson's December 31, 2018 Management's Discussion & Analysis ("MD&A").


  • Stuart Olson generated consolidated revenue of $966.4 million in 2018, compared to $1,017.3 million in 2017. The year-over-year change reflects a decline in Buildings Group activity levels associated with a greater proportion of projects being in lower-activity stages of construction in 2018, combined with the completion of two large Industrial Group projects that were in high activity phases in 2017. These impacts were partially offset by significantly higher revenue contributions from the Commercial Systems Group as it continued to benefit from the significant project awards secured in 2017, along with meaningful revenue contributed from the group's new operations in Ontario.

  • Adjusted EBITDA increased to $36.1 million, from $36.0 million in 2017. Adjusted EBITDA margin also increased to 3.7% from 3.5% in 2017, reflecting increased margins on certain Buildings Group and Industrial Group projects that were completed in 2018, together with a year-over-year reduction in incentive accruals, partially offset by lower adjusted EBITDA from the Commercial Systems Group.

  • Stuart Olson recorded net earnings of $5.4 million (diluted earnings per share, or "EPS", of $0.19), as compared to $9.6 million (diluted EPS of $0.35) in 2017. This reflects the impact of approximately $3.5 million in costs related to restructuring, investing and other one-time activities in 2018, and compares to a recovery of $1.3 million recognized in 2017 related to restructuring activities, partially offset by lower adjusted EBITDA from the Commercial Systems Group.

  • The Company generated adjusted free cash flow of $19.5 million ($0.71 per share) in 2018, a decrease of $4.4 million from $23.9 million ($0.88 per share) in 2017, primarily reflecting lower net earnings.

  • Stuart Olson ended 2018 with a cash balance of $25.9 million and additional borrowing capacity of approximately $71.5 million, providing combined available liquidity of $97.4 million. This compares to combined available liquidity of $153.9 million as at December 31, 2017, which included $31.7 million of cash and $122.2 million of additional borrowing capacity. The change in combined available liquidity primarily relates to the use of cash and a draw on the Company's Revolving Credit Facility ("Revolver") to fund investments in working capital required for ordinary operations and normal course final project adjustments and the acquisition of Tartan Canada Corporation ("Tartan") in November of 2018. Also contributing to the year-over-year change in available liquidity was a decline in last-twelve-month ("LTM") EBITDA, as calculated under the Revolver, which differs from the calculation of reported adjusted EBITDA, primarily with respect to the timing of recognition of certain expenditures.

  • As at December 31, 2018, the Company's net long-term indebtedness to adjusted EBITDA ratio was 2.8x, or 2.6x on a pro forma basis inclusive of Tartan's LTM adjusted EBITDA. This compares to 1.7x at December 31, 2017. This change in leverage reflects the draw on Stuart Olson's Revolver in order to fund working capital requirements, as well as the impact of debt financing related to the Tartan acquisition in 2018.

  • On November 6, 2018, Stuart Olson acquired 100% of the issued and outstanding shares of Tartan, a privately held industrial services provider in Western Canada, for a purchase price of approximately $12 million. Tartan specializes in the provision of mechanical maintenance services to the oil and gas, pulp and paper, petrochemical and power sectors. The acquisition expands the Industrial Group's access to a larger share of the industrial market, both in terms of mechanical and general contracting opportunities, and Tartan is expected to provide a meaningful contribution to Stuart Olson's 2019 results as the business is integrated into the Industrial Group.

  • Stuart Olson negotiated the following amendments to the Revolver:
    • On November 28, 2018, amended the terms to enable the Company to enter into equity hedging agreements.
    • Subsequent to year-end on March 5, 2019, Stuart Olson further amended the terms of the Revolver to: 1) temporarily increase the debt to EBITDA covenant to provide the Company with the optionality to use the Revolver to fully settle the repayment of its $80.5 million convertible debentures in 2019, 2) exclude certain non-cash interest costs from the calculation of its interest coverage ratio covenant, and 3) minimize any adverse impacts to covenant calculations from the adoption of IFRS 16, and 4) exclude costs related to certain shareholder activities from the definition of EBITDA.

  • Stuart Olson ended the year with a backlog of $1.6 billion, which includes a diverse mix of public, private and industrial projects from Ontario to British Columbia and is predominantly made up of low-risk contract arrangements. During 2018, the Company added approximately $825 million to the backlog comprising:
    • $460 million from the Buildings Group, including three large post-secondary institution projects in Ontario, a large agricultural facility in Western Canada, the expansion of an event centre in Alberta, a health care facility in British Columbia and several horizontal infrastructure projects in British Columbia.
    • $200 million from the Commercial Systems Group comprised of numerous projects, including several residential towers in British Columbia and Winnipeg, an agricultural facility in British Columbia, and the design and revitalization of post-secondary institutions in Alberta and British Columbia.
    • $165 million from the Industrial Group, including the $64.1 million of backlog added as part of the acquisition of Tartan, as well as several insulation and electrical projects in the petrochemical, oil sands and power sectors.

  • Stuart Olson announced a number of changes to the Board in 2018, including the appointments of Raymond D. Crossley, David C. Filmon and Mary C. Hemmingsen, as directors.

  • Subsequent to year-end, Stuart Olson was recognized as one of Alberta's Top Employers in 2019 for the third consecutive year.

  • On March 5, 2019, the Board declared a quarterly common share dividend of $0.06 per share. The dividend is designated as an eligible dividend under the Income Tax Act (Canada) and is payable April 16, 2019 to shareholders of record on March 29, 2019.
    • Since the introduction of the quarterly dividend in June 2011, Stuart Olson has paid a dividend for thirty-two consecutive quarters, including the dividend declared today. This represents $3.78 per share, or $97.8 million in total, returned to shareholders.

    • On a pro forma basis, had the $0.06 per share quarterly dividend been in place throughout 2018, the dividend payout ratio would have been reduced from 55.4% to 27.7%.


  • Stuart Olson generated consolidated contract revenue of $227.6 million in Q4 2018, as compared to $282.6 million in Q4 2017. While intersegment revenue eliminated on consolidation was $11.6 million or 92.1% lower year-over-year, this was offset by revenue decreases of $37.1 million or 36.8% in the Industrial Group, $25.5 million or 18.8% in the Buildings Group and $4.0 million or 6.8% in the Commercial Systems Group.

  • Stuart Olson reported adjusted EBITDA of $7.2 million in Q4 2018, as compared to $11.5 million in Q4 2017. The year-over-year change reflects the net impact of lower contract income and reduced administrative costs explained above (before the impact of an increase in costs related to restructuring, investing and other one-time activities in Q4 2018, which are excluded from the calculation of adjusted EBITDA). Adjusted EBITDA margin decreased to 3.2%, from the 4.1% achieved in the same period last year.

  • Stuart Olson recorded a consolidated net loss of $1.3 million (diluted loss per share of $0.05) in the fourth quarter of 2018. This compares to net earnings of $5.7 million (diluted earnings per share of $0.18) in the same period last year. The $7.0 million change in after-tax earnings primarily reflects the lower adjusted EBITDA, combined with the Q4 2018 recognition of costs related to restructuring, investing and other one-time activities, as compared to the Q4 2017 recovery related to restructuring activities.

  • Adjusted free cash flow declined to an outflow of $0.2 million (outflow of $0.01 per share) in the fourth quarter of 2018, from $10.4 million ($0.38 per share) in the same period last year. The year-over-year change was driven primarily by the decline in net earnings and an increase in cash payments in respect of interest, restructuring, acquisition and other one-time costs, as well as the required funding of legacy pension plans.


Implementation of IFRS 16 - Leases

  • Beginning in fiscal 2019 Stuart Olson will be adopting IFRS 16 – Leases, which will result in a significant change to the way certain leases are measured and presented in the Company's financial results. The new standard includes a reclassification of a meaningful amount of facility costs from rent expense (which is included as a cost in the calculation of adjusted EBITDA), to depreciation and interest (which is excluded as a cost in the calculation of adjusted EBITDA). While the new standard will impact the calculation of adjusted EBITDA, it will not result in a change to net earnings over the life of each lease.

  • The new standard will be adopted on a cumulative catch-up basis, meaning that 2018 results will not be restated for 2019. As such, the outlook below reflects a comparison of expected 2019 results under the new IFRS 16 lease standard to the amounts reported for 2018 under the previous standard. The Company currently estimates that $6.5 to $7.5 million of lease costs previously directly expensed will become depreciation and interest under the new standard. Please refer to the "Changes in Accounting Policies" section of the December 31, 2018 MD&A for further details.

Stuart Olson Consolidated Outlook

  • On a full-year basis, Stuart Olson expects 2019 consolidated contract revenue and adjusted EBITDA to be significantly higher, and adjusted EBITDA margin to be slightly lower than in 2018, based on the outlooks for each of its operating groups below. Excluding the changes in accounting from the adoption of IFRS 16, the Company expects adjusted EBITDA to be modestly higher year-over-year.

  • While Stuart Olson does not ordinarily provide a quarterly outlook, commentary on first quarter expectations has been included in this outlook to reflect the combined negative impacts of the continued oil price volatility and mandatory Alberta oil production curtailment on capital spending by Stuart Olson's integrated oil sands customers in the first part of 2019, together with a significant first quarter shift in project mix and stage of completion as compared to the same period last year. Accordingly, while management expects full-year results to improve, first quarter consolidated 2019 contract revenue is expected to be meaningfully lower than in Q1 2018, with significantly lower adjusted EBITDA and meaningfully lower adjusted EBITDA margin results.

Industrial Group

  • On a full-year basis, revenue and adjusted EBITDA from the Industrial Group is expected to be significantly higher in the 2019 fiscal year as compared to 2018. This outlook reflects a robust pipeline of construction opportunities for the group, together with the addition of a full year of revenue and adjusted EBITDA contribution from the recently acquired Tartan business, as well as an increase to adjusted EBITDA from the adoption of IFRS 16. Adjusted EBITDA margin for the group is expected to be meaningfully lower year-over-year, reflecting last year's completion of major projects that contributed significant close-out margins to 2018 results.

  • Industrial Group results for the first quarter of 2019 are expected to reflect the reduction in planned oil sands capital spending related to both the negative impact to the Company's integrated oil sands customers of the imposed mandatory Alberta production cuts and a volatile benchmark Western Canadian Select oil price, combined with a year-over-year shift in project mix and stage of completion. As a result, the Company anticipates that the Industrial Group's first quarter revenue, adjusted EBITDA and adjusted EBITDA margin will be significantly lower as compared to the first quarter of 2018.

Buildings Group

  • For the 2019 fiscal year, the Buildings Group anticipates significantly higher revenue and meaningfully higher adjusted EBITDA year-over-year on the basis of increased revenue and the impact of IFRS 16, paired with a modest decline in adjusted EBITDA margin. This outlook reflects a robust pipeline of opportunities for the group in 2019, combined with a greater proportion of projects in higher-activity but lower-margin stages of completion in 2019.

  • First quarter 2019 Buildings Group results are expected to include slightly lower year-over-year revenue with meaningfully higher adjusted EBITDA and adjusted EBITDA margin as a result of the shift in project mix and stage of completion.

Commercial Systems Group

  • On a full-year basis, Commercial Systems Group 2019 revenue is expected to be slightly higher than in 2018, while adjusted EBITDA and adjusted EBITDA margin are expected to be significantly higher as productivity challenges experienced in 2018 are not expected to repeat. The group's adjusted EBITDA will also increase from the adoption of IFRS 16.

  • In the first quarter of 2019, the completion of several lower-margin projects, together with a significant shift in project mix and stage of completion, is expected to result in meaningfully lower revenue and significantly lower adjusted EBITDA and adjusted EBITDA margin as compared to the first quarter of 2018.

Corporate Group

  • Corporate Group adjusted EBITDA is expected to decline significantly in 2019 as compared to 2018. This impact relates to both a significant reduction in share-based compensation expense that occurred in 2018 as a result of a decrease in share price in the year, as well as an expected increase in 2019 incentive accruals relating to the anticipated improvement in operating performance. The Corporate Group also will benefit from the impact of adopting IFRS 16.

  • First quarter Corporate Group adjusted EBITDA is expected to significantly improve year-over-year, reflecting the changes in accounting from adopting IFRS 16 and a shift in timing related to incentive plan accruals.


Stuart Olson will hold a conference call and webcast to discuss its 2018 fourth quarter and full-year results on Wednesday, March 6, 2019 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 Wednesday, March 20, 2019 by dialing 1-888-390-0541 (Canada and USA) or 1-416-764-8677 (outside Canada and USA), pin 339193. 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 general contracting, 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 was recognized as one of Alberta's Top Employers in 2019 for the third consecutive year. 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 made under the section titled "2019 Outlook" including, without limitation, those relating to expectations regarding changes in:




Stuart Olson's backlog and the implication that such backlog will be converted into revenues;


expectations regarding changes in 2019 adjusted EBITDA and adjusted EBITDA margin;


economic conditions;


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", "seek", "continue", "see", "project", "predict", "propose", "targeting", "potential", "could", "might", "grow", "momentum" 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: