Aecon Group Inc. · TSX:ARE
Aecon — Investor Presentation (July 2006)
26 slides from Aecon's investor presentation, July 2006
Slide 1: Aecon Group Inc.
Aecon Group Inc.
Slide 2: Investment Highlights
Investment Highlights Stock Symbol ARE: TSX 52 week range (1) $7.04 - $5.05 Shares Outstanding (1) (2) 38.3 million Market Cap. (1) $210 million Annual Revenue $1 billion (1) Data as at July 12, 2006 (2) Includes 16.6 million shares owned by Hochtief AG (43%) 2
Slide 3: Investment Highlights
Investment Highlights ¾ Dominant franchise in a key Canadian industry • Strong industry growth forecasts (CCA : 5.3% in non-res) ¾ Primary strength & focus is in high growth areas • Transportation infrastructure • Energy sector (incl. Alberta oil sands and Ontario nuclear) ¾ Earnings visibility and
Slide 4: History
History Started in 1910 as Foundation Company of Canada Predecessor Companies… Foundation, Banister, Jackson-Lewis, Pitts, Cliffside, Nicholls-Radtke, BFC, Armbro… …Hochtief partnership Landmark Projects • CN Tower, Toronto • Pearson & Dorval Airports, Tor. / Mont. • Hwy 407 ETR, Toronto • Pla
Slide 5: Hochtief Relationship
Hochtief Relationship ¾ Hochtief currently holds 43% of Aecon shares • Shares now held through Turner ¾ Privatization offer in 2004 rejected by “minority” shareholders • Hochtief offered $6.95 per share - - valuator’s range was $6.88 - $9.25 • No indication yet of Hochtief’s go-forward strategy rega
Slide 6: Corporate Structure
Corporate Structure Aecon Group Inc. Infrastructure Infrastructure Buildings Industrial Construction Development Group Group Group Group • Aecon Buildings GTA • Aecon Civil & Utilities • Aecon Concessions • Aecon Industrial • Aecon Buildings Ottawa • Aecon Constructors - Derech Eretz (25%) • Innovat
Slide 7: Buildings Group
Buildings Group A leader in buildings construction and renovation Core Business: Institutional/Educational Commercial Airports Multi-unit residential Design-build Strategic Focus: Drive margin enhancement (…focus on construction management, design-build New Terminal Building – Pearson In
Slide 8: Infrastructure Construction Group
Infrastructure Construction Group Civil & Utilities: A leading road builder, civil constructor, utilities contractor and supplier of construction materials Core Business: Highway construction Heavy civil construction: Tunnels, transit, power projects Utilities construction: Gas, power, cab
Slide 9: Infrastructure Construction Group
Infrastructure Construction Group Aecon Constructors: A full range of heavy civil construction services Strategic Focus: Quito International Airport Cross Israel highway Nathpa Jhakri hydro-electric project, India 9
Slide 10: Industrial Group
Industrial Group Aecon Industrial: specialists in multi-trade industrial construction and fabrication Core Business: Inside plant construction, primarily in power and nuclear sectors Cogeneration facilities Specialty pipe fabrication and module assembly (Edmonton, Cambridge, Dartmouth) Strateg
Slide 11: Industrial Group
Industrial Group Innovative Steam Technologies: A world leader in the design & manufacture of heat recovery steam generators Core Business: Heat recovery steam generators from 5 to 65 megawatts Proprietary OTSG technology Strategic Focus: Rebounding North American market Retrofit market (GTI
Slide 12: Infrastructure Development Group
Infrastructure Development Group Aecon Concessions: Partnering to develop, finance, design, build and operate infrastructure projects Core Business: Toll Highways Airports Strategic Focus: Quito International Airport Cross Israel Highway expansion Monetization of portion of Cross Cross Isr
Slide 13: Cross Israel Highway
Cross Israel Highway ¾ Develop, Finance, Design, Build & Operate • Total project cost: US$1.2 B • 30 year concession • 72% of traffic forecasted guaranteed by Israeli gov’t ¾ Aecon position: 25% ¾ Book Value (Aecon share): $40.3 million ¾ Traffic Ramp-up on target ¾ Analysts estimate value at $1.30
Slide 14: Cross Israel Highway (con't)
Cross Israel Highway (con’t) ¾ Projected cash distribution: • 2006 approx US$10 million from sub-debt repayment* • 2007 (assumed) approx US$6 million from exercise of government options • 2009 approx US$15 million in first year of dividend payments • 2010 – 2019 total of approx US$30 million in divi
Slide 15: The Growth Story – Greenfield Toll Roads
The Growth Story – Greenfield Toll Roads 80% of increase in value during construction and ramp up 4% 76% 19% 1% ASSET VALUE Greenfield Construction Ramp Up Growth Maturity 2 Years 4 Years 3 Years 20 Years 3 Years Example Time Frame Source: Macquarie Infrastructure Group and Aecon
Slide 16: Quito International Airport
Quito International Airport ¾ Develop, Finance, Design, Build & Operate • Total project cost: US$585 million • 35 year concession • Financial close achieved June ‘06 ¾ Aecon position: approx 45% ¾ Aecon’s Investment: approx US$33 million ¾ Construction value: US$410 MM • Aecon a 50% partner in const
Slide 17: Quito International Airport (con't)
Quito International Airport (con’t) ¾ Quiport operating existing airport since 2002 • Less revenue risk than Greenfield project ¾ Concession in full effect ¾ 51 month construction period • Construction profits expected to nearly finance Aecon’s total investment ¾ Construction done under EPC contract
Slide 18: Quito International Airport (con't)
Quito International Airport (con’t) Sources of Cash (US$ million) Uses of Cash (US$ million) Equity 74 EPC Contract 414 Financing Costs 82 Airport Ops 141 Concession Costs 71 Debt 376 Reserves 24 591 591 Cash Equity Return from Concession Equity investment of ~US$33 million in stages between 2006
Slide 19: Typical Infrastructure Development Project Timeline
Typical Infrastructure Development Project Timeline Project Financial Construction Award Close Complete • Equity In Ca LC s h Development Phase Design & Construction Concession/Operations (e.g. 3 years) Phase (e.g. 5 years) Phase (e.g. 30 years) • Bid Costs Expensed • Bid Costs • Bid Costs & Develop
Slide 20: 2005 Overview / 2006 – 2008 Outlook
2005 Overview / 2006 – 2008 Outlook 2005 Overview ¾ Improved operating results in all three segments ¾ $38 million improvement in EBIT from continued ops ¾ Changes made over last two years clearly taking hold 2006 Outlook ¾ Margin growth to drive bottom line improvement ¾ EPS in line with analyst es
Slide 21: Segmented Results - Jan 1- Mar 31 '06
Segmented Results - Jan 1- Mar 31 ‘06 ($ millions) 2006 2005 Consolidated Revenues 201 173 Operating profit (loss)* (8.4) (9.3) Net Income (loss) (10.9) (8.4) Infrastructure Revenues 62 58 Operating profit (loss) (5.2) (4.6) Buildings Revenues 87 77 Operating profit (loss) (0.5) 0.2 Industrial Reven
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights ($ millions) Mar 31 ‘06 Dec 31 ’05 Cash & Marketable Securities 51.6 49.8 Restricted Cash & Cash in JVs (32.5) (33.0) Net Cash Available 19.1 16.8 Working Capital 58.8 55.8 Total Assets 468.7 504.4 Equity 131.1 106.3 Short Term Debt 8.3 10.8 Long Term Debt 21.6 41.9 Converti
Slide 23: Backlog Revenue
Backlog Revenue $000,000 700 600 500 400 300 200 100 0 ` t 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 Ai 6 or '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 '0 ui 1 '0 rp 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q to Q Core Major projects Backlog margin as a percent of revenue has increase
Slide 24: Strategic Focus
Strategic Focus ¾ Focus on our core expertise (singles & doubles) ¾ Focus on Canada (strongest market in 15 years) ¾ Focus on profitable growth in Alberta and Ontario energy sectors ¾ Leverage civil dominance in Ontario and industrial strength in Alberta to develop civil opportunities in Alberta ¾ F
Slide 25: Strategic Focus
Strategic Focus ¾ Continue to invest in our people ¾ Resolve our legacy issues ¾ Commence construction on Quito International Airport ¾ Begin monetization of Cross Israel Highway investment 25
Slide 26: Looking Ahead – Poised for Value and Earnings Growth
Looking Ahead – Poised for Value and Earnings Growth Fundamentals ¾ Year over year improvement through to planning horizon ¾ Strong and growing markets in virtually all key sectors ¾ Strategic and operational changes have clearly taken hold ¾ Balance Sheet in good shape Hidden Value ¾ Cross Israel H