Letter to Shareholders Banner

First, I would like to thank you, our shareholders, for supporting us as Aecon has evolved into Canada’s premier construction and infrastructure development company.

Last year we committed to steady organic growth in our core market segments of Infrastructure, Energy, Mining and Concessions through four strategic paths: an overarching focus on profitability and operational discipline, improving Aecon’s best-in-class safety and training programs, leveraging Aecon’s diverse service offering known as “One Aecon” and building strong strategic partnerships and alliances. I am pleased to report that we made significant progress on each of these fronts.

Aecon’s 2013 results represented another year of solid progress, with revenue growing six per cent to over $3 billion. We delivered Adjusted EBITDA of $184.0 million for 2013, compared to $171.9 million in 2012. For the third consecutive year, on the basis of Aecon’s continued financial progress and positive outlook, the Board of Directors approved an increase in the annual dividend to $0.36 per share from $0.32 per share.

Underpinning this financial performance was an ongoing focus on execution, performance, operational discipline and risk management. To this end, we built out our project controls team with some of the most knowledgeable people in the business, embedding a detailed set of criteria and risk management practices for project bidding, set-up, execution, cost control and change management.

As we secure Aecon’s leadership position in sectors that have competitive recruitment environments, the development and safety of Aecon’s employees has been a top priority and last year marked another record year in safety performance. We broadened the reach of our in-house training platform, Aecon University, launching a comprehensive project controls curriculum. We were also proud to be recognized as a Best Employer for the seventh year in a row. Aecon’s unique service offering continues to be a competitive advantage, and we have been successfully phasing out lower-margin work and incorporating our diverse expertise into larger, more sophisticated project delivery for our clients. These efforts have seen us achieve a 100 basis point increase in margin embedded in backlog between 2011 and 2013.

For large, multi-year projects, Aecon has emerged as a Canadian partner of choice as a result of both our deliberate positioning in this regard and our successful track record on complex projects. Aecon’s participation in such projects, which drive higher margins, has seen revenue from joint ventures and partnership arrangements grow by nearly 50 per cent compared to 2012. Aecon’s partnering skills have paved the way to capitalize on opportunities across the country, such as the Eglinton Crosstown tunnel project in Toronto, the Darlington refurbishment project and Lower Mattagami hydroelectric project in Ontario, the Anthony Henday Drive ring road in Edmonton, a cogeneration power project in Alberta, and the Waneta Dam and John Hart hydroelectric projects in British Columbia, to name but a few.

As expected, Aecon’s backlog of work is subject to variability owing to the more substantial projects we are working on or in pursuit of. Backlog stood at $1.8 billion at year-end 2013, our pipeline of pursuits in all our market segments remains robust and Aecon was recently recommended for two major projects for a total of nearly $500 million. Additionally, above and beyond backlog, recurring revenues remain strong, comprising approximately 25 per cent of our overall business.

“Our focus is squarely on working towards our target of nine per cent Adjusted EBITDA margin in 2015, which is complemented by cash management and capital discipline – all designed to deliver superior shareholder value. We announced this target knowing it was going to present itself as a challenge, but one we could meet.

The imperatives to reach this target are a drive to a higher-margin mix of business particularly in the Energy and Mining segments while phasing out lower-margin work, leading partnerships on larger, more complex projects, and excellence in operational performance.

Our positive outlook for 2014 is based on five specific key drivers: significant new infrastructure projects ramping up and additional opportunities on the horizon, further growth in our Energy business, securing targeted opportunities in the Mining segment particularly in the potash sector, concluding the strategic initiative with respect to Aecon’s interest in the Quito Airport concession and participating in the continued strong pipeline of P3 opportunities in virtually all provinces across Canada.

On a personal note, it has been a pleasure and a privilege to have served as Chief Executive Officer of this great Canadian company. Aecon has become a team of 12,000 hard-working men and women, operating safely, ethically and profitably.

I look forward to assuming the full-time role of Executive Chairman, and congratulate Teri McKibbon, who will be appointed President and CEO at Aecon’s Annual General Meeting on June 11 in Edmonton. After working with Teri for nearly two decades, I’m confident he will lead Aecon with distinction and a relentless focus on execution. He has assembled a team that has the skill set to work collaboratively with employees across Canada to perform safely and on target for our valued clients and, of course, to serve the interests of our shareholders. All of us look forward to Aecon’s continuing growth and success.

We say farewell to long-standing Director of the Board, Rolf Kindbom, who will not stand for re-election, retiring from the Board after 14 years of service. On behalf of my colleagues on Aecon’s executive management team and the entire Board of Directors, I would like to thank Rolf for his passion, commitment and invaluable contributions.

Moving onward, Aecon has an unrivalled ability to provide a comprehensive suite of construction, contracting and infrastructure development services across Canada. We will continue to develop our balanced and diversified strategy focused on the core target markets of Infrastructure, Energy, Mining and Concessions and will maintain a disciplined bidding approach towards meeting our Adjusted EBITDA margin target of nine per cent in 2015.

Thank you for your continued support.


John M. Beck
Chairman and Chief Executive Officer
Aecon Group Inc.



Onward – Aecon’s 2013 Online Integrated Report with John M. Beck

video link image


1. The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”) as set out in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards (“IFRS”) and to require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company commenced reporting on this basis in its consolidated financial statements at December 31, 2011. The term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS. Amounts previously reported for 2010 have been restated to give effect to these changes in accordance with IFRS. Amounts reported for 2008 to 2009 reflect amounts reported previously in accordance with Canadian GAAP. On January 1, 2013, the Company also adopted various new accounting standards including IFRS 11 “Joint Arrangements”. Amounts previously reported for 2012 have been restated to give effect to these changes, while amounts for 2011 and prior years are prepared in accordance with IFRS or Canadian GAAP before the adoption of new accounting standards in 2013.

2. Adjusted EBITDA represents operating profit (loss) adjusted to exclude depreciation and amortization, the gain (loss) on sales of assets and investments, and net income (loss) from projects accounted for using the equity method, but including JV EBITDA from projects accounted for using the equity method. JV EBITDA represents the Company’s proportionate share of the earnings or losses from projects accounted for using the equity method before depreciation and amortization, net financing expense and income taxes.

3. Book Value Per Share (diluted) is calculated as shareholders’ equity plus the increase in shareholders’ equity if options and convertible debentures in the money are exercised and/or converted plus officer share purchase loans plus the book value of LTIP shares, all divided by shares outstanding at year end (diluted). Shares outstanding at year end (diluted) represent the number of shares issued at the end of the year plus the number of shares issuable if options and convertible debentures in the money were exercised and/or converted plus the number of LTIP shares.