Q4 2020 Aecon Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the icon Q for 2020 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
And you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today.
Adam Borgata Senior Vice President corporate development and Investor Relations. Thank you. Please go ahead Sir.
Thank you Rebecca and good morning, everyone and thanks for participating in our year end 2020 results Conference call. This is Adam Borg and speaking presenting to you. This morning, our genre, we serve Ross President and CEO and David Smith, Executive Vice President and CFO.
Our earnings announcement was released yesterday evening, and we have posted a slide presentation on the investing section of our website, which we will refer to during this call.
Following our comments, we'll be glad to take questions from analysts and we asked at the analyst keep to one question before getting back into the queue to ensure others have a chance to contribute.
As noted on slide two of the presentation listeners are reminded that the information and you're sharing with you. Today includes forward looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties, while the Waco and believes that the expectations reflected in these statements are reasonable and we can give no assurance that these expectations will prove to.
Correct.
With that I'll now turn the call over to day.
Thank you Adam and good morning, everyone.
I'll touch briefly on <unk> consolidated results.
Results by segment, and then address a financial position before turning the call over to Joe and Louie.
Turning to slide three revenue for the year ended December 31, 2020 of $3 $6 billion.
$183 million or 5% higher compared to 2019.
Adjusted EBITDA was $265 million a margin of seven 3% increased by $43 million or 19% compared to 222 million a margin of six 4% last year and operating profit and $150 million was 43.
Million or 40% higher than last year.
Diluted earnings per share for the year was $1 29 compared to diluted earnings per share of $1 12 in 2019.
<unk> results included a net positive impact to adjusted EBITDA and operating profit from the Canada emergency wage subsidy or sues program of $80 million covering the period from March 15 to December two one and <unk>.
11 million of which was in the fourth quarter.
This subsidy offset the impacts of COVID-19 on e-commerce business, while assisting and call them to maintain normal employment levels through this period.
Management estimates that the impact of COVID-19 on <unk> business was a reduction in full year revenue operating profit and adjusted EBITDA for 391 million $66 million and $75 million respectively.
And in the fourth quarter impact.
Impacts from revenue of 82 million operating profit of $10 million and adjusted EBITDA of $7 million.
Reported backlog of $6 $5 billion at the end of 'twenty and 'twenty compares to backlog of $6 8 billion a year ago.
And as announced yesterday <unk> board of directors approved an increase to the quarterly dividend on the basis of continued financial strength and strong cash flow generation and positive outlook with this being the ninth increase and the last 10 years.
The quarterly dividend will increase to 17 and half cents per share from 16th previously with the first increased quarterly dividend to be paid on April five 2021.
Now looking at results by segment turning to slide for construction revenue of $3 6 billion in 'twenty, and 'twenty was $227 million or 7% higher than last year.
This was driven by higher revenue and industrial operations, primarily due to increased activity on mainline pipeline projects and Western Canada.
For our operations and <unk> and transportation systems, driven by increases and major projects and road building operations in both eastern and Western Canada and.
And utilities operations due in part to the acquisition of voltage power in February 2020.
Partially offsetting these increases was lower revenue from nuclear operations, driven primarily by a decrease and refurbishment work and they're dialing two nuclear facility in Ontario is work on the now completed first react to refurbishment wind down and the first quarter of the year and work on the next react to refurbishment.
Delayed to the end of the third quarter due to COVID-19.
Adjusted EBITDA and the construction constriction segment $262 million a margin of seven 2% increased by $77 million compared $285 million a margin of five 5% in 2019.
The construction segment included the net positive impact of 80.002 million 20 from the <unk> program.
After excluding this adjusted EBITDA was broadly in line and 2019.
COVID-19, and volume driven decrease and the nuclear sector and lower gross profit margin and civil operations and urban transportation systems being offset by higher operating profit and industrial operations, primarily from increased volume.
New contract awards in 2020 totaled $3 3 billion similar.
Similar to the level of New awards in 2019.
Construction backlog at the end of December was $6 4 billion compared to $6 7 billion at the end of 2019.
Turning to slide five.
Session for revenue for the year was $98 million, a decrease of $120 million or 55% compared to the same period last year.
This was due to the suspension of commercial flight operations in March 2020, the Bermuda International Airport, followed by a lower volume of flights compared to the prior year at the reopening of the airport on July 1st due obviously to the impact of COVID-19 on global travel as well as from lower construct.
And activity related to building, the new to them and therefore.
For.
Adjusted EBITDA and the concession segment of $42 million with 41 million lower than 2019 due to the COVID-19 impact on airport operations.
Turning to slide six acorns financial position liquidity and capital resources remained strong and the business continued to generate strong free cash flow and 2020.
As at year, and a call out $100 million of cash on hand, and excluding cash and joint operations and restricted cash and a committed revolving credit facility for $600 million.
And nothing was drawn and 6 million was utilized for letters of credit.
Subsequent to year and the performance security guarantee facility provided by E. D. C to support let so credit was increased from $700 million to 900 million.
When combined with this additional EDC facility <unk> committed credit facilities for working capital and <unk>.
With credit total $1 $5 billion.
<unk> has no debt or working capital credit facility and maturities until the second half from 'twenty to 'twenty, three except equipment loans and leases and the normal course.
Capital expenditures are expected to increase and 2021 as a result deferred capital spending in 2020 due to COVID-19 with spending in 2021 and expect it to be more in line with 2019.
With completion of construction is the Bermuda International Airport interest related to the non recourse debt financing of this project will no longer be capitalized and instead will be reported as interest expense.
And annualized basis ex interest expense is approximately $20 million.
Offsetting this to some extent is the impact of reduced amortization.
Due to the concession rate attached to the airport, which is expected to be 6 million lower than 2020.
Neither of these changes related to accounting for the concession and Bermuda impact <unk> cash flow.
At this point I'll turn the call over to Jean Louis.
Thank you David.
Turning to slide seven day.
Fight the impact of COVID-19 on acorns annual results.
We responded with agility to these challenging times and to deliver strong results.
We remain confident that acorn and balanced and diversified portfolio strong financial position and safety first culture.
And we'll be able to grant benefit as we continue to navigate evolving market conditions.
The construction segment is a line to cause a significant infrastructure investment commitments by all levels of government across Canada as well.
And by the private sector across the market sectors, we serve.
The concessions segment is pursuing a number of large scale infrastructure projects.
And targeting innovative development and private finance opportunities.
And industrial power clean tech and other related markets.
As well as participating as a concessionaire out on the five P. Three project.
I don't if either.
On the slide.
Yeah.
Turning to slide eight.
Backlog and the level of New awards in 2020 remains strong and.
Particularly in light of the challenges.
For pandemic environment.
And with backlog of $6 5 billion dollar at the end of 2020.
New awards.
Points for a billion dollar Julian for yet and how long it recurring.
Our recurring revenue programmable primarily in the utility sector.
We expect demand for our services to remain healthy for the foreseeable future as a central and Goldman and provincial governments across Canada.
Identified investment and infrastructure as a key source of 10 minutes.
As part of the economic recovery plan.
A colony Prequalify on a number of large project beach due to be awarded during 2021.
And have a robust pipeline of opportunities to further add to backlog over time and.
Trailing 12 months recurring revenue was down slightly compared to last year.
Primarily as a result of the suspension of commercial flight operation on March 22020, and the Bermuda and that's for net apples.
Followed by a lower volume of commercial flights compared to the prior year after reopening of the Apple on July <unk> and 'twenty due to the pandemic.
However.
Recurring revenue and the construction segment decreased 8% over 2019 and.
And is expected to continue to grow in 2021.
Based on the capital investment plan of a number of key utility client.
Particularly in the telecommunications sector.
Turning now to slide nine and investing further in environmental social and governance initiatives remains a top priority for economy and all that we do.
We are extremely proud to have been named one of the best employers and Canada for 2020 by the concentric best employers for Ghana.
And <unk> and this COVID-19 <unk> reputation as a first choice and ploy nationwide.
Off note.
A current employees rated the employment experience amongst the top 20, and Canada in the areas of employee engagement and <unk>.
<unk> T and gauging and leadership.
And talent focus.
The other ahead, we are particularly focused on expanding our environment to reporting and.
Including greenhouse gas emissions tracking and disclosure.
Setting emissions reduction targets and further identify and climate related risks and opportunities.
We plan to release, our next sustainability report in April 2021.
And look forward to highlighting our achievements and opportunities and sustainability with you as we move forward.
Turning now to slide 10.
The overall outlook for 2021 remains positive despite the ongoing background of coffee and 19.
The pandemic is expected to continue to have some impact and moderating overall revenue and profitability growth expectation in 2021.
Either due to client decision related to scheduled or operating policy.
And due to broader government directives to modify work practices to meet relevant health and safety standard.
While the primary impact from Covid, 19, and will be to reduce revenue and.
Certain areas of <unk> construction segment until normal operations resume.
And as there is no guarantee that all related costs will be recovered and therefore, it is possible and that project margins could be impacted other wind.
And the concessions segment, the new Bermuda International and Apple 10 million open for operation on December nine 2020.
The opening of this new terminal marks a significant milestone for the company and complete the construction portion of this project that was awarded in March 2017.
Commercial operations at the airport continued to recover slowly due to COVID-19 related travel restrictions.
Which have significantly impacted the education industry.
And you have your Asian industry is not expected to improve and meaningfully and 10 significant portions of the global population have been vaccinated and.
Existing travel restrictions are lifted.
As I stated earlier, the overall outlook for 2021 remains strong and as construction continues on a number of projects that ramped up in 2019 and from 2020.
The strong level of backlog and new awards during 2020.
And the strong demand environment for Aegon Soviet season, Inc.
Including recurring revenue program and all subject.
And no one impact of COVID-19 going forward.
In closing we op income.
<unk>.
Out of <unk> employees.
Specially off from time to workers.
For their dedication and professionalism during these challenging times and.
And we remain committed to operating safely and maintaining stringent COVID-19 health and safety protocols.
Across our business.
There are some external and example of our achievements these pasture that celebrate eight homes people projects.
Projects and partnerships.
And magazine released earlier this month.
And available on our website.
We welcome you all to view it and see why.
We also a priority.
Thank you.
And I will now turn the call over to analysts for questions.
At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Yeah.
And your first question comes from the line of Yuri Lynk with Canaccord.
Hi, guys good morning.
Alright.
You mentioned.
The impacts of Covid.
Experiencing some some higher costs.
And revenue delays and how are you accounting for for those additional costs or are they being run through the P&L.
Or are you so sure youre going to be able to recover them.
You don't feel you need to take a write up on the cost for these projects.
So it depends on the project depends on the situation with the client and what's being agreed with decline and our assessment of what's recoverable and what's not so there's no simple answer.
And although.
On a broad basis across the whole business is very much project by project.
Taking into account and the nature of those costs.
And the nature of what we've agreed with different clients in terms of.
The impacts of those costs and reimbursement for those.
It also depends on kind of the nature of the weather it was a complete shutdown or whether it's just ongoing operations.
Impacts from productivity, but.
We factor all into to what we assess the.
Positioned to be on a quarter by quarter basis. So it's a mixed story, but for sure we've had.
Some impacts on our margin as we've gone through 2020.
And you refi if I may be a little more precise operationally I mean have you didn't see direct costs are easy to track.
So.
We are booked at the same moment theyre up and.
And I'm speaking about additional PPE and I'm speaking about ups and pay them and some supply chain problems about.
Site installation, what indications about the transportation of our employees and qualifications.
Zara.
Easy and cost to be to be tracked in terms of indirect costs and consequences and it's a little more complex.
Of course, I mean, the situation depends on our own and.
And in fact in and the jobs were.
Our clients have been suspending it.
Our work I mean.
The discussion up and.
And very quickly and I extremely constructive in the other work, where we haven't been eat.
In terms of productivity and other and essential service and we have no interruption of.
Works I mean discussion at all.
Just and you still ongoing.
Okay.
Okay.
Okay.
Your next question comes from the line of Frederic <unk> with Raymond James.
Hi, good morning, guys.
I'd like to highlight the gains that you've been making on the recurring side of your business and the utility and telecom sectors more specifically.
Can you help us.
I appreciate the momentum that acons enjoying and the segments and I'm just wondering.
And as you look out for a couple of years out is there a path for your recurring activities to perhaps doubled in size and hit a $1 billion per year.
Okay.
Maybe on a broader.
Broad basis, I'm going to speak about our backlog and then from coming back to recurring revenue and.
Quality and backlog is is more important and pure quantity.
It's about discipline.
And when we did you probably have.
And.
Noticed that.
We have been extremely prudent on mega projects, I mean and when.
We lost the Broadway lining and for Cooper.
We lost to Edmonton.
And it's not it's not a real issue, we even didn't beat on some.
Project and Quebec, because we were thinking for the risk profile was not adequate.
And.
And what is important here.
It's about <unk>.
Balancing our activity.
And balancing our TVT I mean, he is one of my key focus about the different sectors and evolve the different segments about the kind of projects.
Paul.
Medium Big Mega.
About the kind of contracts, we sign a unit price target cost.
And lump sum.
And our.
And it's.
Recurring revenues go perfectly within this strategy of balancing as you as you have seen on slide eight.
And they have been increasing by 8% and construction.
And you are not in backlog.
Very strong and utilities, I mean telecom Bell and Telus, but also I mean, GAAP installation with with.
And with Enbridge.
With that.
Very interesting pipeline, you'll probably remember that CIB as I've, just announced something like 2 billion of investment and they got to come in the broadband and.
And installations.
So yes, I mean, we are we are working on this.
Part of our strategy and and we are extremely happy about it.
Okay. Thanks, that's helpful turning to nuclear work Youre going to be active on two refurbishments. This year instead of just one how much of that informed.
Positive outlook for for this year for 2020 line.
So.
Tivoli.
We have finalized the first reactor refurbishment of Darlington and this reactor is now connected to the greed and our client LPG is extremely happy about it.
There has been some delay in <unk>.
Starting at the refurbishment of the second and react to in Darlington.
All PG.
Favoring the operation of the reactor.
In front of the immediate construction I mean during.
This first wave of COVID-19.
In parallel we have begun our first reactor.
And Bruce.
Plus steam generator replenishment means that during the year 2021 will be that for the first time.
Two reactors and full refurbishment with the lessons learned of the first one and Darlington. So yes, it will impact all day.
Ali.
Our situation.
Thank you I'll now turn it over good results guys.
Thanks for that.
Your next question comes from the line of Jacob bout with CIBC.
Hi, good morning.
Good morning, Jake and good morning.
Just wanted to understand so.
The next 12 months backlog is flat year on year, but.
400 million and revenues is pushed out into 2020 so.
Assuming the effects of Covid are lessened as we move into 2021.
All else being equal construction revenue should be should be higher and subsequently we should be thinking about.
Yes.
You will see on slide eight.
The backlog there.
And to be used during the next 12 months was $2 8 billion at the end of 2019.
And also $2 8 billion at the end of 2020, you have also to note is that something like $400 million of Pac TVT adds not out turning 2020.
And due to Covid.
And the 218 fact.
And as to be compared with two point for it means that yes, we see a positive outcome for all of our revenue during the year too.
2021, I remind you that as our record revenue and all our master service agreements, especially in that and utility is not taken into account and the calculation of our backlog and has to be items.
Okay. That's helpful. And then my second question is just.
On the dispute with <unk> and.
Commodity.
When do you expect a resolution from for those two.
<unk>.
I think both of those will take some time Jacob.
Okay.
Have to work their way through a court process.
On the cable access side and.
And Saskatchewan.
That was likely to be a lengthy process, even before COVID-19. The COVID-19 is.
For the delayed.
Court proceeding so that's still.
In terms of a legal resolution to that a few years at least.
Kimono is still in the early stages and.
Too hard to predict.
In terms of what the timing of that will be.
But again likely to be.
Couple of years or so so they are likely to be longstanding.
Processes.
Yeah.
I'll leave it there thank you.
Sure.
Okay.
Your next question comes from Bonnie player with sturdy and capital.
Yes, good morning, gentlemen, and congrats for the good quarter.
When we look in terms of project pursuits still 40 billion could you maybe provide some color about how much of this $40 billion of project pursuit.
He is looking to be awarded in 2021.
Yes.
I will definitely T.
And what what we can say is that.
Ask Tony to every day by the number of New project, arriving on my table and selection of this project and.
In terms of best fit.
For the company and its one of our strength and I.
He is one of our.
I mean, neither one of my ex.
Exercise and.
And every day.
And have you Didnt key.
It's better to speak about the biggest project, but you have also a lot of big and and medium project from the goal. So I would say that most probably eglinton west.
<unk> channel.
As carbon rule.
And the subway.
And.
Probably Quebec city trauma.
And.
Via rail and maintenance facilities, and Montreal and Toronto.
Toronto.
Yeah.
I'll probably.
Going to be awarded during 2021.
And there are also a lot of other project that may be pushed a little fuzzy line 2022, what is important to note is that.
No projects.
And our backlog has been canceled and I would say no projects that were in the pipeline.
As been abandoned.
And it's very important for us and.
And this is why we have a.
And real.
Positive do you want for years to come.
Okay, Okay, that's great and John when we look at the U S strategy. Obviously, there is some momentum with the new president and the U S with the upcoming and infrastructure plan. So do you have better color about how to tap for to size the market. Unfortunately.
The U S and any color about the strategy at the Econ that you were.
Might be looking up and down the road.
And you didn't see when you see.
And the pace of the new projects and trash trucks.
Project, which is our core competency and coming in Canada.
I mean, it was it was ones off targets EBITDA.
And we cannot leave and we such a big neighbour and not having a look and not trying to understand what can happen.
And.
We are not stopping.
We are not in a hurry we are.
And just watching it I mean, once cannot and and from time to time and trying to.
Put the feet on the table.
On another hand.
You'll remember we haven't quite a small company.
Related with nuclear activities that we are.
Ramping up our activities on meaning and nuclear in Canada, we have become a major player.
And.
We will.
And make everything to take advantage of biopsy.
Nuclear refurbishment program in the United States.
Through these small companies.
And the lessons learned and are in Canada.
Okay, perfect and then if we look on the concession side.
Could you maybe provide an update on the traffic numbers of Bermuda Airport and also what we should expect in terms of a concession projects that will ramp up in 'twenty and 'twenty one.
Yes, hi, bedrock, so yes in terms of Bermuda.
What we saw was that day.
Decent recovery from <unk>.
Zero through Q2.
In Q3, we saw some recovery.
And flights.
Which kind of leveled off again towards the end of the year.
With a second wave and for the travel restrictions being imposed so through Q4, we kind of operate around.
20% of.
Where we were in 2019 for the same quarter.
And it's reasonably consistent.
In Q1.
With that level, so it's definitely plateaued a little bit.
And.
And obviously now as we look forward as.
Joe Louis you said in his comments, it really going to come down to the vaccination program.
The one bright spot is the vast majority of travel and then I have a Bermuda based from the U S and the U K and both of those are.
Kind of leading the charge to a large extent on the vaccination for so.
So hopefully that's a positive for the second half for the year, but we expect the first half of this year to be.
Similar to our.
What we saw in Q4, which is around kind of 20% to 25%.
And where we were in 2019 and those same quarters.
Okay, that's great color and what about the ramp up for other concession projects outside of Bermuda and for 'twenty and 'twenty One day.
Yes, so we've obviously got the Wolf loop project, which is up and running now although we were a small part of that concession so that doesn't have a huge impact the.
And the other projects remain and construction through 2021, so we won't be into the concession face of those.
This year.
That will start to kick in in 2022 and beyond.
Okay and.
And now that construction has done a Bermuda and did the terminal is open and back in December.
And would be curious to have your view about the fortunate to monetize or partially monetize Bermuda and recycled money and the other concession projects down the road or maybe timing is not appropriate.
And yes, I mean, I will take the answer.
We have wonderful tool now in Bermuda and say you tell.
And the op ample time and and what is important for us to ramp up the operation.
And <unk> Vita blowing.
And to know perfectly and our asset and how to use it efficiently and she is our first target for the moment.
And then as we have already fading and various occasions I mean, all options are open.
But we.
We have not taken any decision at the moment.
We are focused on ramping up our tools.
Okay. That's great and then last one for me when we look at the cash deployment are fortunate fees could you maybe.
Give me the other priorities right now, especially in light of the valuation and maybe provide some color about the working capital requirement as we go through 'twenty and 'twenty one.
Yeah ill take up and so.
Obviously from a capital perspective, we announced the dividend increase yesterday.
We're also still focused on.
And kind of took and acquisitions and think there is.
And do more on that from <unk>.
<unk>.
Adding to.
Kind of a recurring revenue portfolio and utility type operation. So so that's the and ongoing focus for us.
And as well as.
Obviously, continuing to grow the business and.
And the performance security requirements that go along with that.
So they are the <unk>.
And refocus who's right now.
In terms of working capital.
Don't expect anything, particularly unusual in 2021.
It should have the normal seasonal profile.
Where the working capital builds and Q2 and Q3.
And Walgreens.
In Q4 overall, we expect working capital capital to be a positive contributor and.
2021.
And just as we look at the.
The stage, we will reach and various of the major projects and the milestone payments are and those.
We think working capital will be a net positive in 2021 for cash flow.
Okay. That's great. Thank you very much for that time.
Thank you.
Your next question comes from the line of Mona Nazir with Laurentian Bank.
Good morning, and congratulations on the results.
We've been hearing more and more projects delayed and projects getting pushed to the right although its not.
And when you were looking at quarterly performance, but then on the Opex side and productivity issues have been referenced by a competitor and you touched on it a few minutes ago and just wondering if you have had to adjust the bid process our composition of their actual bids at all and if you could just speak about how you've been limiting downside risk even.
On a go forward basis, particularly as Covid continues to have an impact. Thank you.
Okay. Thanks for the question and.
Sure.
A few ways too.
To address it and.
And he didn't T and.
We can have the smartest strategies and and we try to have it but at the and it's all about execution.
Total bottle rationale accidents.
And we have launched for very important initiatives at Acorn about continuous improvement.
And within all our jobs and you'll probably remember I mean, we have been speaking.
Two and three quarters ago, and bottle with God and are projecting to roam tool.
And where we could use some and.
And Nina and methodology of work too too.
We really and house, all our pre fabrication and installation works.
We have now embarked in this initiative.
Recruiting.
Specialized.
And the talents and expertise.
Working with external consultants and <unk>.
Siding off a few pilot projects.
Extremely important because our rational.
Excellent and key to our profitability and I am extremely focused.
On this initiative too.
To reach and very strong culture, which our religion and obviously critical path.
And on our jobs.
Yeah.
Second point, I mean, and yes, as you say coffee to add some impacts on productivity.
We have now been living with Covid for the last.
Almost 12 months.
We know how to work with it.
The first months is difficult.
All our employees I mean.
On site and they know that when they follow the protocol and Twitch means that most often and I can say that.
Coffee that doesn't come from our job site brought.
Bye bye community within within the job we have initiated a very strong program of testing.
In addition, our people of all support departments are working extremely efficiently.
From home, so and I think net and we are really and we aren't really on it.
So as you say.
Some of our piece and we have been speaking about this project I mean at Aegon and we.
Total knee assess all our projects all of them.
Our productivity.
All our claim.
And the recovery capacity at every quarter and we make is a necessity.
A tremendous adjustment.
And so we are not that much worried about it in terms of bidding as I was telling you a little earlier I mean, it's about discipline.
We are not solving.
We are comfortable backlog that we are extremely prudent we go where we want a GUL and.
And we will we would adjust for all these path into the future.
Okay. Thank you I'll leave it there and keeping with the one question.
Thanks.
Sure.
Your next question comes from the line of Michael Top home with TD Securities.
Thanks, Good morning.
One of them.
Can you talk about the margin profile and your current backlog as compared to the last several years.
<unk>.
Along with the margin profile of the work you're bidding now and how that frames your margin expectations for the construction segment and 2021.
Yeah, Hi, Mike So.
Your line.
We think about margins and margin progression.
Probably.
More appropriate to use 2019 as kind of a baseline so much going on in 2020 in terms of Covid and subsidy and the impact of that on the margin. So.
And I use 2019 as a base line.
Certainly.
Posed to the right and margin progression in 2021 based on the.
And the program of work we have.
And of those.
And so we think thats going to be a contributor to growth and profitability in 'twenty, one and so.
And not just the revenue growth, we were expecting but we do see margin expansion.
Going forward in terms of new bids and the bidding environment.
And Joe Luisa already referenced.
Number of opportunities and the strength of the market.
Our approach to bidding which is to only go after those projects that makes sense for us and.
Margin profile would be where other big factors, we look at and debt. So.
That's the goal.
And is to continue to.
Be additive to margin as we put new projects into backlog and.
That should drive future margin growth beyond this year.
Okay. Thanks for that Dave.
Question about the corporate and other costs they were relatively flat year over year on a full year basis and 2020.
If one excludes the transition charge debt.
That impacted Q4 and 19, just wondering if you can come on and comment on how you expect corporate and other cost to trend in 2021.
Yes, so again.
A little bit noise and the.
In 2020.
Again, COVID-19 and subsidy related.
But and in 'twenty, one we expect the overall level to be pretty similar to 'twenty to be honest with you.
When we kind of strip out the noise from 'twenty most of that offset.
And so we see 'twenty, one as being pretty consistent maybe slightly higher.
But but not materially.
Alright, great I'll turn it over thank you.
Your next question comes from the line of <unk> Khan with RBC.
Alright, great. Thanks, and good morning, you shared some color earlier on some of these projects and some of the.
Assumptions that you've made.
And I guess, one of the peers of yours on a consortium recognize some charges a few weeks ago I was wanted to help get some help from your understanding maybe the range of assumptions you've made on some of those LRT project and.
The discussion is ongoing with some clients there and if we can maybe help frame for us.
Potential range of outcomes and are there some potential for recovery should we be keeping an eye on one of those discussions wrap up and kisses and downside risks let me for.
And how you thought about those and kind of the range of potential outcomes that we can expect thanks.
Yeah, Hi, et cetera, so I'm not going to comment on.
And what others have done I don't have visibility into what they've done historically versus what they are doing more recently and whether overall positions are and we certainly know.
All of the same jobs.
All I can say is.
What we said earlier, which is we go through a pretty detailed assessment every quarter of where these jobs should be positioned and and.
As you would expect with any major project, there's always a balance of potential upside and potential time side. These things.
And not linear in terms of.
Resolving.
And claims.
And well known that we have a.
Covid claim on the AG and some project.
And that is going through a process right now.
There's a range of outcomes and that but im not going and get into the details of numbers or specifics given the legalities of that situation.
But I think the broad and series, there's always a balance.
And yes as upside from positive settlements and dam side its settlements don't reach our expectations.
But we think it's.
And the right level and we've been pretty prudent as we've gone along and these projects from day one.
Great. Thanks very much.
Our next question comes from the line of Chris Murray with ATB capital markets.
Thanks, So much good morning, so just for the revenue stack.
Thank you back for the revenue stack for for 2021.
And just you've done a great job of kind of giving us. The next 12 months backlog and I think it's for just sort of just confirm for $2 8 billion that you are talking about for next year that already includes the for Hunter that rules.
In the period. So if you can confirm that that'd be great.
You've given us the recurring revenue, but just I guess the other piece of it is sure.
Should we be thinking about call. It your book and burn type revenue for inside 2021 in terms of your visibility.
And with what you're at least having for any right now in terms of the project.
Yeah, Hi, Chris so.
Youre right I mean, the two eight we have going into 2021.
It takes into account everything reschedule. So all the delays that we saw this year will be.
Factored into what we expect going forward.
That doesn't necessarily mean that all falls into 2000, Twenty's and some of that falls into the later stages of the project. So if we have a revenue GAAP on a specific project and 2019 because of Covid.
We don't necessarily catch that opened 2020, if that project goes for another year or two.
To a large extend some of that volume will come towards the end of those projects, but that revenue stack for each will.
Talk about takes all that into account.
And so the $2 eight going into this year.
As Youll, Louis said earlier, effectively 400 million higher than the amount. We worked off in 2019 from that same 12 month backlog. So so that's $400 million difference there and.
Terms of book and burn I think the best way to think about that is.
We have certain businesses, where that's kind of a feature of the work they do transportation being.
And the most obvious example of that in both eastern and Western Canada, and if you look at 2019.
And you take that 12 month backlog, we had coming into 'twenty.
2020.
And $2 eight we said we had 400 of that and it didn't happens to fall and we had recurring revenue of about 500 that gets you to two nine so the book and burn in 2020 was about $700 million, that's not a new.
Usual level of book and burn work for us.
Given the market, we see this year don't expect it to be.
Materially different to that one way or another.
Yeah.
And will depend because MTO and MTP and <unk> and.
Alberta Transportation and road building and BC those.
Bidding periods will be ramping up.
Through the spring and so we'll have to see.
One of those programs look like and our success rate and everything else, but that's kind of how do we think about it.
Okay fair enough and.
And if I can just get one more.
And how maybe you want to take this one.
And unfortunately.
Unfortunately, you guys came off a project with Pemex and I guess there were some issues around.
Some of the rationale behind that I guess any commentary on some of the underlying issues. There how you address them and how do Ya man or some other risks associated with what happened there.
Yes.
We'll handle this one.
And you know that we had a fatality.
And our credit one of TNF, and <unk> still very emotional and for Aegon.
Of course, we can't accept it.
Taken all the corrective actions.
Constantly communicated with our client and Trans mountain.
We are working closely with Trans mountain and.
We have a constructive dialogue about future jobs I remind you that we all state and the deferred contract sales, but six and that this credit sake is not in and backlog and so yes. I mean, we are we are taking a lot of cash.
And all of it.
Alright ill leave it there thank you very much.
Thanks Kristen.
Your next question comes from the line of Ian Gillies from Stifel.
Good morning and run.
Good morning.
And there's been a lot of commentary around.
And work and how construction of the bidding environment, but I'm curious how much of that and.
Margin commentary his finger on some of the internal initiatives, whether it be for supply chain and trying to apply some of these lean manufacturing.
And how that's impacting your business today and.
And how long do you think it may be until you can fully implement this across the parts of your business and maybe maybe except accepting this sort of be sort of operating parameters.
And I'm not sure I mean, Nate was difficult and I understand your question, but.
Are you all.
Are you asking me about the disturbance season from our supply chain.
I'm just curious on how much of the margin improvement you think may come from some of the internal initiatives versus the constructive <unk> environment.
Okay.
Are you speaking about continuous improvement initiatives that I've been talking about a few minutes ago, yes.
Yes, okay.
I think it is very important.
Tackle this issue to tackle them and the.
And the problem of <unk>.
And Ah.
Operational excellence.
On our job. So we are at the beginning.
Of the initiative and I'm, rather and to get take about.
What can be what can be the debt.
Results are fit for each.
Changing and culture, what I call. This religion of the other critical path.
But I am not going to quantify it too.
Two day, but but I think this will obviously drive our margins up.
That's helpful and then the other part.
Just curious on maybe.
Mentioned, just lean manufacturing for construction and a few of your projects day.
As you think about that.
And how applicable do you think that will be or is there any parts of the business that we should be thinking about where it may make a larger impact.
I would tell and a first basis everything that is repetitive.
And as a perfect ground for continuous improvement methodology, I mean on guard and note. We added more than 400 composite panels too to fabricate and to install on some bridges I mean, when you bid as index through incremental.
Methodology I mean, you have some time, one and with time at the same task to be done so what.
And what we have to achieve is that the second one.
I mean, even better than the first one the third one is better than the second one we have to track our metrics, we have to benchmark everything at GAAP to eliminate the waste I mean in terms of waiting time, Inc.
In terms of.
And movement Unecessary movement of our personnel, whose jobs for our favorite time and pipelines all swap favorites I mean, when you have 100 kilometers of pipeline to be installed and what it isn't and continuous improvement is important and on our LRT job for example, I mean.
Way we can.
We can have a different look at our program of work to ensure a much better adherence to the program of work.
To be able to work and a concurrent and junior English.
And and the words, because our timeframes are usually reduced and then be able to face better I would project.
In order to have our system operation.
<unk> opened on the on a stage and.
Pattern, rather than everybody and everything and Vienna, and I think we will make quite a quite good progress on the sort of issues.
And.
Okay. Thank you very much shelter and the call back over.
Your next question comes from Matthew buy down with <unk> capital markets.
Hi, good morning.
Just wanted to get your thoughts on.
Roughly speaking I think in the past and you've talked about being able to comfortably support.
Sort of a six to 7 billion backlog.
Just wondering assuming you do win some of the major contracts that you referenced earlier are up for awards. This year, what sort of new investments would you need to make to be.
We're able to support that new growth.
And then your backlog.
Either labor or equivalents, our technology investments.
Yes.
I remind you that we are burning our backlog every day and then for new job, but I mean all of.
And I'll set a bye bye for one being are being executed what is sure is that the number of project arriving on the table I mean, he's he's extremely strong.
We need to invest constantly in our people.
And our industry.
He's about other people is the ball our professionalism so.
And we invest in our call and University, we have a project management Academy.
We are creating as you.
We would imagine that continuous improvement.
Academy and.
We have a very specific program for our supervisor.
Our young field engineers and we.
We all we are investing a lot on the day. So I mean, obviously, we'd have more investment in equipment in 2021, because in 2020, a 12 relatively reduced from 2009.
19, and I'll also.
For multiple convinced that are working on continuous improvement we lead.
And to tackle it was a new innovation.
<unk> tools, I mean I'll take for sure.
And Dave the new tool does that and and and it will be good I mean, it wouldn't be good for the company and it will be good for your profitability.
Okay. Thank you for that detail and just one more question.
And about your current strategic plans I think one of your key objectives.
Achieving best in class margins and the construction business.
Just like to get more color on who do you see as your best in class peers, and North America, and then what sort of the long term potential for future margin expansion from here.
Yeah, I'm not I'm not going to give your name and I know all of my peers and visiting and most of that job during the weekend.
Trying to understand what do they do well and do week.
And what can we do better.
And what are you sure that all of our goalies. He's he's extremely clear each day is to become the number one Canadian infrastructure company.
We are fighting every day for this.
It's about.
Professionalism and and and we are not like it at all and in improving our professionalism about equal.
Yeah.
Okay. Thanks.
Thanks.
For the answer and congrats on the strong quarter.
Thank you.
Yes.
Your next question comes from the line of Maxim <unk> with National Bank financial.
Hi, good morning, gentlemen.
Good morning, Mike.
Just a couple of very quick ones is it possible to get a bit of an update and relationship the voltage transaction and how that's going sort of integration any learnings and any sort of new contracts that you were able to secure and now that you have this assets and maybe just talk a little bit about sort of the ultimate upside from this.
Yeah, Hi, Mike So.
I would say.
Overall.
We're pretty pleased with the.
We're voltage is in terms of we've been able to get them prequalified with a number of major hydro transmission clause. So they wouldnt have qualified for before we.
And we should lead to some pretty significant opportunities.
Hydro one being a great example of that.
Obviously.
We closed the acquisition in February and.
And then with Covid.
And much that definitely had an impact on that business in 2020 that was one of the areas of the business, where we saw some work and.
Move out to the right so.
<unk> thousand 20.
And.
And definitely impacted by Covid, but the longer term prospects are very positive.
No shortage of.
Opportunities in the high voltage space and so.
<unk>.
I think we said when we acquired it.
We saw the potential to scale up business pretty quickly, we probably lost.
A bit time and 2020 given.
Given the circumstances, but over the next couple of years.
We expect to see pretty strong growth and the high voltage space.
And Dave just.
From my understanding.
This asset a scalable right now that just sort of corporate pasted onto your footprint right something like that the expertise. So you don't have to actually add and other voltage and in other geographies how should we think about this.
That's exactly right is the kind of business that is used to operating across the country.
It's really the expertise as opposed to anything that you're acquiring.
And so it's.
It's very mobile.
Used to working in remote locations across Canada.
We can add the kind of local labor force.
And to any particular initiative or opportunity. So so yes.
Very scalable and they were held back.
And historically, just given their size and balance sheet, and all that kind of stuff and obviously.
We're able to open a lot more doors for them into larger projects and larger cards.
For sure and then just one.
Sort of clean up question in terms of shoes, how should we think about it for and kind of Q1 and the first half because I guess Q2.
It's going to be pretty easy comps. So we should expect nothing and then something in Q1 day.
And maybe clarifying this ore and potentially quantify and.
Yeah, So the program and.
June to come to it and.
Mid year. So obviously, we don't expect anything and the second half for the year and as you said.
Once we hit Q2, we're starting to compare two periods a year ago.
But were impacted so we expect to.
And eligibility and Q2 to be to be minimal.
Q1, and we'll see.
Some eligibility, but on a on a pretty low scale. So it's not going to be a material contributor to our 2021.
Okay. Thank you very much that's it for me.
Thanks.
Your next question comes from the line of Mona Nazir with.
Laurentian Bank.
Hi, just a continuation a little bit on for last topic going into acquisitions and just given the strength of the current and business and the balance sheet and do you think we could see greater M&A activity in the coming months and.
And I know you just mentioned potential and the high voltage area, but has the strategy changed at all or is there any shift and targeted vertical. Thank you.
And I can run out for other question I mean, and let's see we have the capacity for those kind of operations. So Chuck.
Tuck in acquisition, we are every day on it.
And I have understood that part of our strategy was to.
And to grow in the utility sector and what we can see I mean are doing.
During 2020 just to Anchorage.
S to proceed.
For what.
We are also.
And having a look at some adventure and more transformative.
<unk>.
And.
We are spending some time.
All right.
Okay. Thank you.
Your next question comes from the line of Michael <unk> with TD Securities.
Thanks, just wanted to follow up here.
I appreciate all the detail you provided I guess over the course of 2020 and respective.
The impact of COVID-19, and so that helps us think about 2021.
On a full year basis.
And just wondering I guess for modeling purposes about Q1.
There was not much of an impact obviously in Q1, 'twenty and 'twenty, but you did highlight and your outlook.
From government, Covid, 19 restrictions and and.
Net debt are affecting certain projects I guess, particularly in D C and maybe maybe some other areas as well. So is there any way to help us understand.
What sort of an impact we can think about for <unk>.
Q1, 'twenty and 'twenty in terms of in.
In terms of these COVID-19 impact.
Yes.
Good question Mike.
And 'twenty the profile of <unk> 'twenty 'twenty, one is kind of almost flipped from what we saw in 2020 with Q1 2020 was obviously.
Last week pre COVID-19.
And then Q2 Q3 took some pre <unk>.
Sizable.
In terms of.
GAAP revenue.
This year, the first quarter will see the impact of.
Some restrictions and employee numbers are impacting the coastal gas flowing.
Coastal gasoline pipeline and the.
And so see projects so that will.
B are Q1, only impact and then we should be back up for ruling and at full pace. After that obviously Bermuda will continue to be a.
A factor as well and Q1 this year so.
And beyond and so I think when we look at Q1 this year versus Q1 last year, we have.
A few additional headwinds that we didn't have.
Last year and the same quarter, but then Q2 and Q3 should be very much the reverse where we see significant upside to where we were last year. So it's kind of a different profile, but Q1.
All else being equal should be.
Probably coming in and a little lower than what we saw in Q1 last year.
Alright, that's very helpful. Thank you.
At this time there are no further questions I would like to turn the call back over to Adam for closing remarks.
Thanks, very much Rebecca and everyone for joining us today as always if you have follow up questions feel free to reach out and we wish you a good rest of the day and stay safe all will join you on our next call. Thanks.
Thank you for participating and this concludes today's conference call you may now disconnect.
Yeah.