Aecon Group Inc. is forecasting another year of income growth on the heels of record annual revenue, as the construction firm continues to shore up its backlog of infrastructure projects.
Chief financial officer David Smales predicted revenue growth “in the single digits, but still relatively strong,” for 2020.
Smales cited a full order book and high demand for infrastructure and public-private partnerships in Canada, including urban transit and nuclear refurbishment projects.
Aecon expects more than 40 per cent of its $6.79-billion backlog — roughly in line with 2018 — will be worked off in 2020, building on a six per cent boost in 2019 revenues to $3.46 billion.
The rosy picture prompted the company to raise its quarterly dividend 10 per cent, despite weaker fourth-quarter results.
The Toronto-based firm will pay 16 cents per share on April 2, up from 14.5 per cent previously.
“We always say don’t look at one quarter in isolation,” Smales said. “Over the course of the year, margins continue to move in the right direction.”
Analyst Frederic Bastien of Raymond James said Aecon “continues to execute admirably, enjoys healthy demand for its core services, and benefits from reduced global and domestic competition.”
The fourth quarter saw Aecon earn 28 per cent less in profits but score three major contracts with a total value $690 million, and the company’s share valued at $420 million.
The trio comprises pipeline construction in Alberta for Trans Mountain Corp., piping installation for NOVA Chemicals in Ontario and a joint venture to upgrade a pair of highways on Vancouver Island and B.C.’s Lower Mainland.
On Feb. 10, Aecon signed off on a 50-50 joint venture with Spanish conglomerate Acciona SA to replace the Pattullo Bridge in the Lower Mainland, a project valued at $967.5 million.
One week earlier Aecon announced a $30-million deal to acquire Voltage Power, an electrical transmission and substation contractor based in Winnipeg.
Benoit Poirier, an analyst with Desjardins Securities, called Aecon’s debt-to-adjusted earnings ratio of 1.8 “a key competitive advantage” to snag new projects.
In 2019, new contract awards of $3.43 billion were booked compared to $5.84 billion in 2018.
A sizable chunk of that comes from a $639.8-million fixed-price construction contract, signed in April, to widen Highway 401 between Mississauga and Milton in the Greater Toronto Area, with Aecon granted a 50 per cent stake.
Chief executive Jean-Louis Servranckx told analysts on a conference call Wednesday that the novel coronavirus has not interrupted work or supply chains.
Aecon said it earned $20.2 million or 31 cents per diluted share for the three months ended Dec. 31, compared with $27.9 million or 41 cents per share a year earlier.
The company was expected earn 32 cents per share on $934.6 million in revenues, according to financial markets data firm Refinitiv.
Quarterly revenues decreased 3.3 per cent to $917.3 million.
For the full year, Aecon earned $72.9 million or $1.12 per diluted share on a record $3.46 billion in revenues. That’s up from $59 million or 94 cents per share on $3.27 billion in 2018. Analysts expected $1.14 per share in earnings on $3.49 billion of revenues.
Excluding the contract mining business sold in November 2018, revenues grew 13 per cent instead of six posted Tuesday.
This report by The Canadian Press was first published March 4, 2020.
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Christopher Reynolds, The Canadian Press