SNC-Lavalin reports second quarter results for 2019.
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Release date- 01082019 - SNC-Lavalin Group Inc. (TSX: SNC) today announces its results for the second quarter ended June 30, 2019.
All currency references in this press release are in Canadian dollars except as otherwise indicated.
2019 Second Quarter Financial Highlights
New strategic direction announced: Company has reorganized into two clear business lines; SNCL Engineering Services, high-performing and growth areas of the business, and SNCL Projects, which will manage the exit from lump-sum turnkey (LSTK) construction contracts.
Adjusted EBITDA: Negative adjusted EBITDA from E&C(8) of $151.8 million is within the range of negative $150 million to negative $175 million announced on July 22.
Cost reduction program: Company remains on target to realize over $100 million in cost savings by year-end 2019 and in achieving an annual run-rate of $250 million in cost savings in 2020.
Dividend reduced: As the Company implements prudent measures to improve performance, it is reducing the quarterly dividend from $0.10 per share to $0.02 per share to deleverage and strengthen the balance sheet.
'Since assuming the position of interim CEO on June 11, I have listened carefully to our stakeholders' concerns and we have rapidly begun executing on a new strategic plan for the Company that is focused on de-risking the business and surfacing value in high-growth, high-performing areas of the business,' said Interim President and CEO, Ian L. Edwards. 'As part of our strategy, we will maintain a focus on effectively executing on the remaining backlog of lump-sum turnkey projects, and to this end are implementing several measures, including a new project oversight function that reports directly to me. While we implement these measures, I have recommended we take all prudent actions to strengthen our cash position and balance sheet; this includes reducing the dividend.'
'The decisions I have made, I believe are necessary to set us on a more sustainable path going forward,' added Mr. Edwards. 'We are building from a strong foundation, including a robust SNCL Engineering Services backlog of approximately $11 billion as of the end of Q2, an increase of 9% year-over-year.'
Second Quarter Results
The Company reported an IFRS net loss attributable to SNC-Lavalin shareholders of $2,118.3 million, or $12.07 per diluted share for the second quarter of 2019, compared with a reported IFRS net income attributable to SNC-Lavalin shareholders of $83.0 million, or $0.47 per diluted share, for the corresponding period in 2018. The Company's second quarter 2019 net loss attributable to SNC-Lavalin shareholders included a non-cash, goodwill impairment charge and an impairment of intangible assets relating to the Company's Resources segment totaling $1.8 billion (after taxes). The Company also recorded an amortization charge of intangible assets related to business combinations of $40.5 million (after taxes).
Adjusted net loss from E&C(1) in the second quarter of 2019 was $299.8 million, or $1.71 per diluted share, compared with an adjusted net income from E&C(1) of $113.5 million, or $0.65 per diluted share, for the corresponding period in 2018. The adjusted net loss from E&C(1) in the second quarter of 2019 was mainly due to a negative Segment EBIT(7) for SNCL Projects and an increase in financial expenses.
SNCL Engineering Services
SNCL Engineering Services, which includes EDPM, Nuclear, Infrastructure Services, and Capital, recorded a strong performance with positive Segment EBIT(7) of $192.5 million, representing a 12.2% ratio (8.2% excluding Capital).
Revenue from SNCL Engineering Services totaled $1.6 billion for the second quarter of 2019, an increase of 11.4%, compared to the second quarter of 2018, due to revenue increases, ranging from between 4% to 37%, in all of its segments.
The SNCL Projects business line, which includes the Resources and Infrastructure EPC Projects segments, recorded a negative Segment EBIT(7) totaling $307.7 million in the second quarter of 2019. This negative Segment EBIT(7) was mainly due to unfavourable reforecasts on certain major LSTK construction projects for a combined net unfavourable impact totaling approximatively $280 million. This was mainly due to higher forecasted costs to complete and increased warranty costs on two Oil & Gas and one Mining & Metallurgy LSTK construction projects in the Middle East, as well as two Infrastructure LSTK construction projects nearing completion in Canada.
Founded in 1911, SNC-Lavalin is a global fully integrated professional services and project management company and a major player in the ownership of infrastructure. From offices around the world, SNC-Lavalin's employees think beyond engineering. Our teams provide comprehensive end-to-end project solutions - including capital investment, consulting, design, engineering, construction management, sustaining capital and operations and maintenance - to clients across the EDPM (engineering, design and project management), Infrastructure, Nuclear, and Resources businesses.
Non-IFRS Financial Measures and Additional IFRS Measures
The Company reports its financial results in accordance with IFRS. However, the following non-IFRS measures and additional IFRS measures are used by the Company: Adjusted net income from E&C, Adjusted diluted EPS from E&C, Adjusted net income from Capital, Adjusted diluted EPS from Capital, Adjusted consolidated diluted EPS, EBITDA, Adjusted EBITDA from E&C and Segment EBIT. Additional details for these non-IFRS measures and additional IFRS measures can be found below and in SNC-Lavalin's MD&A, which is available in the Investors section of the Company's website at www.snclavalin.com. Non-IFRS financial measures do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS measures provide additional insight into the Company's financial results and certain investors may use this information to evaluate the Company's performance from period to period. However, these non-IFRS financial measures have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
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|Date:||Aug 2, 2019|
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