Q1 2021 Aecon Group Inc Earnings Call
Yes.
Good day, Thank you for standing by and welcome to the Aegon.
Q1, 2021 earnings conference 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.
That's a question during the session you will need to press star one on your telephone.
Please be advised that today's conference is being reported.
If you require any further assistance. Please press star zero I would now like to hand, the call over to your host Adam. Please go ahead.
Thank you Peter good morning, everyone and thanks for participating in our first quarter 2021 results conference call is not for again speaking.
Presenting to you. This morning are John <unk>, President and CEO, and David sales 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.
Ask that analyst keep to one question and a follow up before getting back into the queue to ensure others have a chance to continue.
As noted on slide two of the presentation listeners are reminded that the information we're sharing with you. Today includes forward looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although aegon believes these expectations reflected in these statements are reasonable we can give no assurance that the expectations will prove to be correct.
Now I'll turn the call over to Dave.
Thanks, Adam and good morning, everyone I'll briefly summarize <unk> Com's consolidated results review results by segment, and then address <unk> financial position before turning the call over to John Luis.
Turning to slide three revenue for the first quarter of $754 million was $7 million or 1% higher compared to last year.
Just an EBITDA for the first quarter of $21 million.
And a two 8% improved by $2 million or 8% compared to adjusted EBITDA of $19 million a margin of two 6% in Q1 last year.
Diluted loss per share of 31 cents in the quarter compared to a diluted loss per share of <unk> 19 cents in the same period last year.
Largely due to interest related to the Bermuda Airport concession sales.
Now being expensed rather than capitalized.
Reported backlog of $5 $9 billion compares to backlog of $7 billion a year ago.
Now turning to results by segment. There's no you don't slides pool construction revenue of $744 million in the first quarter was $9 million or 1% higher than the same period last year due to a higher volume of nuclear refurbishment work in Ontario, and an increased volume of cash.
And telecommunication work in the utility sector.
Partially offsetting these increases was lower revenue from road building and mainline pipeline work.
Okay.
Adjusted EBITDA from construction of 22 million net margin of 3%.
Increased by $5 million compared to 17 million a margin of two 2% in Q1 last year.
Primarily from higher volume and gross profit margin in utilities.
Volume in nuclear.
These increases were partially offset by lower volume and gross profit margin and industrial operations.
New contract awards of $200 million, Inc. First quarter two.
696 million lower than last year.
Largely due to an award of $465 million in the first quarter of 'twenty two 'twenty for the two low bridge replacement project in BC.
Turning to slide five.
<unk> revenue for the first quarter was $11 million, a decrease of $16 million compared to the same period last year, primarily due to much reduced activity at the Bermuda International Airport.
Adjusted EBITDA in the concessions segment of $10 million was 4 million lower than last year due to the COVID-19 impact to NAV for operations in Bermuda.
Turning to slide six.
Financial position liquidity and free cash flow remains strong.
At March 31st day call had $31.5 million of cash on hand, excluding cash in joint operations in restricted cash and it can be.
We see the revolving credit facility of $600 million, which was undrawn other than 7 million new utilized for letters of credit.
In the first quarter of this year the performance security guarantee facility provided by E. D. C to support let's say credit was increased from $700 million to 900 million, bringing acorns committed credit facilities for working capital letters of credit to $1 $5 billion.
<unk> has no debt or working capital credit facility maturities until the second half of 2023, except equipment loans and leases in the normal course.
At this point I'll turn the call over to Joe Louis.
Thank you Dave.
Turning to slide seven despite the impact of COVID-19 on the economy first quarter results.
We continued to deliver solid results.
We remain confident that day comes balanced and diversified portfolio strong financial position and agile culture.
Will enable us to successfully respond to the unknown impact of COVID-19 going forward.
The construction segment is aligned to the significant infrastructure investment commitments by all levels of government across Canada.
As well as by the private sector.
Providing essential services across the market sectors in which we participate.
The concessions segment is pursuing a number of labs scaling from such a project and targeting innovative development and.
And private finance opportunities in industrial power clean Tech and all the related markets as.
As well as participating as a concessionaire on day five biscuit projects either.
<unk> on the slide.
Yeah.
Turning now to slide eight backlog recurring revenue program from a pipeline of bidding opportunities for new work.
We remain at strong levels across Canada.
Despite the challenges of a pandemic environment.
Backlog at the end of the first quarter was $5 9 billion dollar.
Which does not include the Edlington Cross town West extension Advanced Tunnel project in Toronto.
Our net Econ consortium has been named as fifth negotiations proponent and which is expected to be awarded in the second quarter helped solve in 'twenty one.
We expect demand for our services will remain healthy for the foreseeable future.
The government and provincial governments across Canada have identified investment in infrastructure as a key source of 10 minutes as part of economy recovery plans.
Acorn is prequalified on a number of large project beats due to be awarded during 2021 and 2022.
And I have a robust pipeline of opportunities to further add to backlog over time.
Yeah.
Trailing 12 months' recurring revenue was up 5% versus the prior period.
Primarily from growth in utilities operation.
Recurring revenue is expected to continue to grow based on the capital investment plan of a number of key clients biopsy.
Particularly the telecommunications and power sectors as.
As well as from the recovery of aviation traffic at the Bermuda International Apple.
Turning now to slide nine earlier this week a congress.
<unk> annual sustainability report.
Building better together.
Outlining our progress on key accomplishments in responsible ESG practices.
The report includes a comprehensive greenhouse gas inventory of direct emissions from all our penetration in 2020.
Our best in class practice, and a significant step in the evolution of Aegon sustainability program.
A corner probably announce that it has set a target to reach net zero emissions by 2050.
With an initial interim target to achieve a 30% reduction in direct fuel emissions by 2030 as compared to 2020.
This positions <unk> as an industry leader and underscores our commitment to honest innovation reduce waste boost efficiency and consistently improve business performance.
The sustainability report is available on our website and we welcome you all to view eat.
And see why we also wake and proud of it.
Turning to slide 10, <unk> overall outlook for 2021 remains positive despite the ongoing background of COVID-19.
The pandemic is expected to continue to have some impact in moderating overall revenue you're going to profitability growth expectation in 2021.
Is that due to client decision related to scheduled or operating policies all.
Hold your broader government direct teams to modify work practices.
To meet the relevant health and safety standards.
In particular.
The concession segment commercial operations at the Bermuda International Airport continue.
Continue to be challenged by COVID-19 related travel restrictions.
We channel significantly back to the aviation industry.
Global Air traffic is not expected to improve meaningfully and seen significant portions of the global population have been vaccinating.
And existing travel restrictions are lifted.
The bright spot for Bermuda is that the U S is by far the largest source market for passenger volume.
Followed by the U K.
Both countries that are leaders in vaccine rollouts.
So we are optimistic the second half of 2021, we will see meaningful improvement.
Okay.
As I stated earlier.
Overall outlook for 2021 remains positive as construction continues on a number of projects that ramped up in 2019 and 2020.
The level of backlog and New awards during 2020, and the strong demand environment for Aegon Services, Inc.
Including recurring revenue programs.
Thank you.
Stay safe.
Get vaccinated and follow the advice on probably cancel authorities.
Moving now I'll turn the call over to analysts for questions.
Okay.
At this time I'd like to ask a question press Star one on your telephone keypad Thats Star one to ask a question.
And there was a question from the line of Yuri Lynk with channel.
Panna accord.
Hey, good morning, everyone.
Good morning.
Just wanted to dig in a little bit on the New awards I depth, the tough year on year comps, but 200 million of New awards I think that that's the lowest level I've seen them.
Back about eight years or so so.
Anything to call out in terms of what happened on maybe on the smaller awards. Sometimes you know you are quite successful in booking a number of small jobs.
And more importantly.
Does this is this a low for the backlog for this year do you see it increasing borrowing by the end of the year any color would be appreciated. Thanks.
Okay Yuri.
We have already already animal waste side, I mean look at backlog evolution only on a three months period I mean, it's not weighted relevant I mean, we as you can see we have $5 9 billion of backlog plus the old five of record.
Backlog, we will have some quasi backlog at the moment I mean during the weeks to come.
It means for me that.
Not a real issue so far I've always say that between six and seven including record revenue I mean, we are comfortable if.
If you go to slide eight I mean, and you have a look at the Central Bank has about one of the bank to be burnt in the next 12 months' season, you just realize that at the end of Q1 2019 that figure was $2 3 billion.
At the end of Q1, $2022 5 billion, increasing at the end of Q1 2021, $2 7 billion.
The increase in <unk>.
<unk> mean that.
You can anticipate revenue growth in our in the in the year to come.
Okay.
For the long term we choose.
Beyond 24 months I mean, there are plenty of fine.
And I just remind you you read that.
<unk>.
Well, there's a plan the plan was about disciplined on major projects.
And balancing our tvt's, especially growing new TD Ts.
Within our backlog, we faded constantly during the last 20 months season, and we did it.
We are focused on delivering our ongoing important projects, but of course, we have an EIS M D.
Very important pipeline I mean, you see a income following slides 40 billion expected.
We are answering to put quantification.
File from owners I mean M.
Every month.
And in one year only on one project, we have not been free quantified I mean, it's like overwhelming get successful being quantified.
You know you know about it I mean, Ontario line COVID-19 on top of the line <unk>, which is the rolling stock and signaling all we all three which is a huge job via rail maintenance facility, both in Toronto and Montreal Rem.
<unk> Apple station Nse's channel.
Probably I would look at that.
But D C for the first time its return again draw Damasse Bridge, which is all channel, which is a very important job I remind you that we would have a preferred Peter I mean, a few years ago on this one.
Lorraine share port, Quebec allow T M.
The prolongation of <unk>, obviously, we're gonna be prequalified, we are executing at the moment.
Ah phase of ramp.
It just means that.
It's not a real issue we have an eye on it.
T M.
He is extremely important and we are extremely focused on it.
Okay, that's great color I'll hop back in the queue. Thanks, guys.
Your next question comes from the line of Frederic.
With Raymond James.
Hi, good morning, guys I'd like to COVID-19.
I'd like to get a bit more color on sort of the successes <unk> had on the utility side are you do you do flag.
Telecommunications sector and also power related work is sort of very encouraging so would you mind just.
Expanding a bit further on that.
Yeah.
We are extremely happy with our utility sector, you probably realize about it I mean as Ive just say to you re lease holds a plan.
And and we did it.
Telecommunications is going extremely well I mean, Telus and bell has a lot of new.
Capex.
Program in place you've probably heard also about CIB about all all around broadband.
And bridge.
In gas.
Distribution also he's extremely active.
Eric eating.
Within downtown the G alternatives I mean, everything is moving in the right direction in terms of electricity I mean, we are not as a trend just emerging in terms of transmission and distribution. This is why we did this acquisition of voltage we're very upbeat.
All of this activity.
Hi.
In addition.
The contractual aviation orders and just kind of fall off revenue.
<unk> is different.
Interest take it gives a lot.
Two loyalty with our customers to our professionalism.
And this explain I mean.
Why TD Ts he's he's one of our top performer today.
Thank you and I I read that.
That represents about 25% of your top line.
As you continue to gain a.
A fair amount of success there is there potential for that that part of the business to increase further from 25%.
Yeah.
I would say, yes, or no yes, because we liked his business in it.
Quite a good complement to our.
Roads and bridges works to our heavy <unk> transportation and nuclear.
On another hand, we you'll remember that.
On waste focused on I think a balanced activity and each time I closed with price I mean before bidding.
Cash flow about it I think our balance at TVT is is one of the main reason of our strengths and our resilience. So we will have a look at.
Every opportunity that we can take.
With profit generation, new TVT, we're going to make it.
Okay. Thank you.
Your next question comes from the line line of Bennett.
Yes, Jordan capital.
Yes, good morning, everyone.
John We are yes, John we are David.
I was wondering if you could provide more color about the expectation for Qs in the coming quarter.
My understanding this was not material in Q1 and in terms of capital deployment.
Maybe how do you see a buyback versus M&A at the current point in time and also the maximum financial leverage you would be willing to consider on their M&A.
Okay. So I'm trying to remember the day.
Current elements to that.
We choose and if you have to remind me.
Come back to me.
I think going forward, we expect <unk> to be even lower than it was in Q1.
In Q2 and Q3. The program was initially meant to end on June 5th.
And the federal government.
Monday and answered they were going to extend it to September 25th.
But for that extension period or at least from July to the end of September the subsidy rate start to reduce.
Fairly significantly over that period of time, so that will reduce any subsidy just because the rates are lower.
We're also comparing.
Revenue too.
Periods last year that were obviously heavily impacted by COVID-19. So.
The first.
The first hurdle is are you eligible on a revenue decline basis and given those periods. We're comparing two we're now expecting.
Much if any of our business could be eligible and even to the extent we are the rates are going to be quite low so.
Soon we expect to be.
You mentioned non factor in 2021.
On the on the capital allocation side.
Obviously, we remain.
Open to tuck in type acquisitions, we think there's still opportunity.
Going back to the previous question around utilities, we've done a number in that space.
And we think there's still opportunity there, but also in other areas as well so.
That remains something that we're focused on obviously, we increased our dividend.
Last quarter.
For the full year.
And as far as share buybacks, that's something that we'll continue to monitor but nothing.
In place at this point in time.
And then I think you had a question of leverage as we open more.
Just in term of M&A.
Assuming something more a larger could could come at one point in time.
Just wondering how do you see the financial leverage.
Be optimal level, you would be willing to go out David Yes, yes.
So I mean, obviously, we had a nice position today, where leverage is very low.
In and around one times.
EBIT.
Sure.
We're very comfortable.
Anywhere up to two times, obviously the focus for US is having the performance security capacity, whether that's bonding with SLC facilities.
To support growth and to support the.
Prequalification process for what we expect to be a huge pipeline of opportunities continuing to commitments over the next couple of years.
So preserving that balance sheet strength is important in terms of a larger acquisition.
We think up to three times is certainly manageable.
Without impacting any of that capacity into the performance security and growth.
And Ah much further than three times, we would.
Start to see that being something that wasn't sustainable for any lengthy period of time.
Great color. Thank you very much for those things.
Sure.
Your next question comes from the line of Jacob.
D C.
Good morning.
Good morning Jacob.
Hoping you can provide an update on how much work has been pushed out due to COVID-19 over the past 12 months.
Thank you said at two.
2020, Mg centers on $390 million and then how is this reflected in backlog and as we think about kind of year on year comps from backlog.
Yes, I mean, it's exactly what you say Jacob I mean, we we consider that something like $400 million of just being pushed to the right.
And.
It's a tough time.
A timing issue and we can see today what is important to note is that no project future prospects as being deleted.
After this coffee.
So.
It's not it's not a worry for us we have noticed this.
Around Q3 last year and it's exactly what it was.
What was expected.
Okay, maybe just a follow up.
Yeah.
You've committed now to 30% reduction in direct Seo to 2030 net zero by 2050 can you talk about ESG as a criteria from a procurement process.
Any talk of this happening right now and.
Does it differ between private sector and government.
It's a very interesting question I mean for the last 10 years I am coming from Europe, you, probably remember in September 2018, I arrived in Canada.
Europe is.
More advance than North America lenses topics.
But for the first time within the last 10 years.
I just couldnt Vince.
The weighted copying it means that more and more of our discussions.
Our about ESG.
With our clients Hugh you imagine that they also.
We are on their way to disclose it is that commitment for 2030 medium term in 2015.
And by contracting with a cold wet committed too ambitious.
Achievements with this I mean, it just <unk> you probably remember that you have three group when you speak about greenhouse gas emission.
The first one is a direct can be 12 to walnut rather than direct but when an owner contracts with acorn in acorns makes a lot of effort to reduce <unk>.
<unk> mission is good.
Good for.
Following so.
We are trying to have as much as we can criterias for being awarded which are linked with our efforts I mean are related with the G.
And its coming I, just can't see that it's coming.
Thank you.
Maybe I can add something else I mean.
All of these efforts of good I mean of course, it's good for the Earth is good for the planet.
But it's good for <unk> I mean at the end of the day, we just realize that.
It's just about working better either just about eliminating waste.
Just about consuming it.
Less to have the same reason for just about being more more efficient and this is why we are embarking I mean with a lot of enthusiasm.
In this movement.
Your next question comes from the line of Michael <unk> with.
TD Securities.
Thank you good morning.
Good morning, Michael.
My first question is.
Just when I look at the construction segment beyond the productivity challenges that have been.
And issue to one extent or another throughout the COVID-19 pandemic.
Based on what you know today can you provide some commentary on the extent to which you expect any cash.
COVID-19 related restrictions be day government directed or or client directed to affect the business.
In Q2 and beyond if you have any visibility and so specifically I'm thinking about the fact that there were some restrictions in D. C. In the first quarter not sure what the status is as far as those projects and then we've had some recent announcements in Ontario, I know that relates to non essential work, but just looking for any net.
Any commentary on all of that please.
To make it seem kind of line basically we all see the central services in all provinces.
It means that we can go on working there may be some restrictions.
But we are essential service, we have to work.
Second point.
We are just getting better and better with this COVID-19.
In terms of organizing our work in terms of protecting it.
Our employees I mean in terms of screening in terms of rapid testing each time, we have an alert.
On a job.
Just I mean, becoming.
Very good.
Yes.
There is a need for vaccination.
Obviously sales that COVID-19 can get out from the landscape as it.
As soon as possible so.
They will be in the future some consequences.
About some or all of the restriction of I just say, we can now called.
Much better much better about it.
Okay. No that's helpful. Thank you.
Second question relates to the nuclear new.
<unk> operations.
New cleaner activity in the construction segment appears to have picked up in the first quarter after having been slower in 2020.
And I'm just wondering if is the nuclear work you are carrying out is that still ramping up further from here or was the level of activity you were running at in the first quarter is that representative of what we should expect over over coming quarters.
Okay, basically we have more activity now because we are working on two units two reactors I remember that during the last two years, we were working on neon one unit at Darlington.
That's been achieved the reactor has been connected back to the great a great success.
Now we are working on the second reactor.
The turbine generator.
In Darlington and we are working on the first reactor of Bruce and the first steam generator replacement.
This explains why we have more activity I remind you that we have a contract for four reactors at Darlington.
And Bruce we have a contract for one with an option.
For the five remaining we are working on this on the on the remaining one with with Bruce power and discussing about the condition of execution.
So this will give you a trend for the I would say for the full year two call but.
Regarding the much longer.
Longer term I mean.
I'd say, we have three.
Three areas.
Of great interest I mean to the first one is about waste treatment orders as major component replacement on these two nuclear power plant just produce.
A lot of waste.
Just has to be treated.
And <unk> efficiency and we are working on this.
Second part I would say.
Small modular reactor.
This is growing rather fast <unk> selected <unk>.
Technical partners that we have an association and we are partnering with the three of them.
It's a it's a very very interesting future opportunity for us.
The last one is about dismantling U.
No that <unk> will be dismantled in the year to come we are actively working with OTG preparing these big jobs.
So nuclear I mean, it's not only a problem of full time, it's about medium term and longer term for us.
Okay. Thanks for that and I appreciate the commentary on the longer term. That's that's helpful. Thank you.
Your next question comes from the line of Mona Naser with <unk> Bank.
Good morning, Congratulations on results and thank you for taking my question.
Good morning.
So high interest from the last year has been a complete Walton from you guys and just wondering from your perspective and I understand these things.
But currently what are the greatest lever is that could positively impact obviously the vaccine rollout, but is there anything else that perhaps are not.
Adding enough weight on and then Conversely, what are the most significant risk factors I noted earlier, we just spoke to the productivity on the productivity front and getting better and better but is there anything else, we should be cognizant of or something that's top of line for you. Thank you.
So obviously you have begun with COVID-19 kavita killer rates come in.
Pilau still dying from coffee, we do we don't have to forget it and we cannot.
Lower our guard on.
Coffee day.
Okay.
In terms of improvement.
Evidently product TVT is extremely important I mean, we havent been speaking a lot about continuous improvement program about <unk> I mean.
I want a call in the position of delivering better than any other infrastructure company in this country at the end of the day as a result of colony's adjusted some of the results of its project.
And on each project execution is a key is a keyword.
We are also working a lot on our design integration capacity.
Being able to streamline the design at the <unk>.
Beginning of the project being able to optimize in terms of quantity and to optimize in terms of constructive BTT.
You're seeing it.
There is a lot of improvement to.
Two to obtain.
From there.
<unk> I mean definitely.
The growth of population in Canada.
The standard is he's about half a million you called my remarks have just noticed.
Last week and announcements by the <unk>.
Government of Canada out about easing and streamlining it.
Some permanent resident requisite for a certain number of categories.
The movement is that the trend is they'll all be per logmein.
Need means of transportation that need powers, they need clean water they need energy and.
And this is good to see the good for Acorn.
Acorn.
Greece cash do you have noticed I mean.
Coffee is a is a risk.
And obviously on on each job.
We can always up some from competitors that.
Decide to have some.
I would say reckless attitude and we have to be capsule could be disciplined.
We know what our targets.
Because they are the one fitting perfectly with our strength and this is what we are looking at to prevent this week.
Okay. That's great. Thank you I'll step back in queue.
Your next question comes from the line of <unk> Khan with RBC capital.
Yes.
Thanks, just a question on sort of the pipeline of work and the mix of your revenues right now.
In terms of the projects that you're sort of seeing in the pipeline I guess on some of the infrastructure announcements that have come through is it more shorter terms are a book and burn projects or is it longer term projects that are taking a little bit to come through and secondly is there any sort of implication of that on your mix of fixed cost versus cost plus projects. It seems like that's run up a little bit into the 60%.
Range over the recent quarters, just want to get an understanding of the type of projects that are out there in the pipeline.
Okay.
First question short term midterm long time, I would say, it's much more about mid term and long term activities.
Sure Jess.
Being said I would say naturally.
As those projects I mean, there's always a time to be at a time.
For evaluation of our beat and financial close when it's a design build finance or our design build finance operate and maintain.
And then after you just begin with that.
From design activity utility relocation in most of our jobs, so midterm and long term is the.
He is a is a real.
Answer.
Your second question was about.
It's a mix.
Our activities in <unk>.
We are extremely focused on on balancing as per hour sectors as a failure, but we are also.
Yes.
Interested in balancing the size of our projects the geography of our project and the mode of contractual aviation.
I'm not I'm.
I am not worried about the mix it still under what what we like I just remind you that.
It's not as simple as to say fixed price is.
Difficult and unit price ETE.
Just go for example for the normal Brendan but to the job with <unk>.
Ministry of transportation of Ontario's. They are all unit price job you have 14 competitor that you have to be extremely.
Why then smiled about your competitive advantages there.
And then I'll hop projects and you cannot make any mistake during execution.
Some lump sum I mean, we are just towards the end of the process to to compete so.
I'm comfortable with what we have at the moment in our backpack.
Okay, and then just a quick housekeeping one just looking at the expenses here and it looks like the materials line is down about 25% year over year.
From Q1 of last year to Q1 of this year.
Just wanted to understanding of is that sort of like a one time thing or is there some sort of cost savings in there as we try to forecast itself for the rest of the year.
Yes.
Driver of that mix is really the project profile.
That is being worked on in any particular quarter. Some projects in some periods have a higher content of.
Subcontractors.
This is.
Our labor.
Some projects, if they're ramping that will have a higher materials component in the.
Earliest phases.
Really just a.
A timing thing quarter to quarter very difficult to get any read through as to what that means in subsequent quarters.
Isn't really a driver of our overall profitability or.
Impacts of our cost base interest.
One cost, replacing another type of cost at any particular quarter based on the activities that are underway. So.
Yes, I wouldn't read too much into that.
So I guess for the full year should just be normal course insurance with expensive line in either direction.
Where in any given year again.
It can skew more to one cost cash created another depending again.
Then on the type of work.
But that doesn't really play into our margin profile or anything like that because these are all cost.
All but whether it would show up as a higher material component or highest subcontract component.
The overall price of the job and so.
It doesn't really impact anything from an overall margin perspective.
But having said that.
Generally over the course of EBITDA, yes, it kind of evens out.
All else being equal in terms of the kind of portfolio of projects we have underway.
Okay, great. Thanks, so much for the color.
Your next question comes from the line of Devin Dodge with BMO capital markets.
Thanks.
Wanted to ask you about your per.
<unk> with export development, Canada.
Could you provide some color on what projects.
That can be used for and maybe the reasons behind.
Increasing at Inc. And the last time, we saw icon increase at that facility with shortly after you were awarded that contract further Bermuda Airport. Just wondering if there is some additional international work that you are looking at.
Yes.
Hi, Devin.
The EDC facility primarily.
Is used to support.
Larger peak free type projects within Canada or internationally.
He can also.
He used to support projects to have.
And indirect export element to them. So it's to support project within Canada.
That will be.
Used to.
Increased trade with the U S. For example.
Gordie Howe bridge would be a good example of that.
Given the pace of <unk> would be included in any way, even if it wasn't that would still qualify.
All of our manufacturing facility that was designed to.
Ship products overseas. So anything that was really an export angle or a P. Free type project, having said that given the.
COVID-19 issues last year EDC did extend.
Flexibility of.
The performance.
To guarantee that they provide so it can be applied to any project at this point in time.
Point that will revert back to just pequine could export related so not necessarily.
And the reason for the increase is really we've talked.
Already on this call but.
Also in the materials that on previous calls about the strengths of the market we expect.
Going forward.
We want to build the capacity now.
As opposed to.
Tried to build that capacity once once were.
Warded those jobs. So this is really just about continuing to.
Build a capacity for performance security ahead of the growth that we see coming over the over the next few years based on the strength.
Net investment programs and infrastructure.
Okay. Okay. That's helpful. Thanks for that maybe just sneak in a quick modeling question for you Dave.
Pretty notable.
Cash tax payment in Q1, just can you help us understand what drove that and how we should we be thinking about cash taxes for the balance of the year.
Yes, that's primarily a one off in the first quarter is really a consequence of the fact that.
Through 2020, obviously, we have to make installment payments.
Through the year and those installment payments in 2020 based on the mix of profits from 2019.
We're we obviously had a significant contribution from Bermuda, which is tax exempt.
That mix changed in 2020 with Bermuda, obviously was.
Significantly impacted by COVID-19, but.
<unk>.
Had the benefit of the <unk> program in 2020, which is fully taxable.
And so those installment payments made during the course of the year, which is set.
Here were not sufficient to.
Take into account that change in mix and so in the first quarter of the following year you have to kind of top out those installment payments.
To the extent you need to and that's what happened in the first quarter going forward, we just back to the regular.
Installment payments that we have to make.
Okay. Thank you I'll turn it over.
Your next question comes from the line of Ian Gillies with Stifel.
Your line.
Good morning.
One of the.
Interesting disclosure.
Now Selina project in.
With respect drug works I'm, just curious so on any day.
And with that particular market that made you choose that one or what perhaps is pulling you into that market in the U S to take a look at.
I mean, the first part of your question.
I could not understand there was a problem in my old Youll can you do it again please.
Yes, I was just curious as to whether or what may be pulling econ into bidding on a project.
In and around the northwest U S specifically Seattle.
And if.
Is there anything I guess.
Pulling you there.
Okay got it.
United States is ready to embark in a very ambitious program about infrastructure. So we cannot not apple look at it.
The main parameters for us to go.
I would say it would be two the first one he asked to be within the core competency of a car.
Not going to change country and change competitive.
It has to be.
On the scope of work that we perfectly master in are in Canada.
The second parameter is about partnering it.
Either we pay out of the same categories in us all with local.
Companies.
To be sure.
That we can make it and we can make it profit. This is the way we are going to.
Look at the market.
Infrastructure with new willing in United States.
And then switching gears.
Gears, maybe a little bit here and I think everyone's well aware of all the infrastructure spending when do you think some of that spending will translate into new project announcements that may not yet be known by the market or.
Sorts of things.
Are you speaking about United States or Canada.
Specifically.
Yeah.
I think.
We have a fab knowledge of what's its called me. It means that you probably remember when COVID-19 emerge.
There was a lot of talk about shovel ready projects and infrastructure itself and work like this means that you cannot on Friday decide that you're going to begin to build an infrastructure job on Monday.
The work you have a lot of preparation do you have a lot of environmental assessment right of ways per meets utility relocation and so we have quite a good visibility.
On the specific project and we also have visibility on the global envelope from the provincial government from the CIB from the federal government. So.
I would not expect surprises I mean do we just have to focus from the right project.
In front of our strains.
Find the right partners. The right design is the right teams and make it happen.
Okay.
Thank you very much.
Your next question comes from the line of Chris Murray with <unk> with a BP excuse me.
ATB capital market.
Thank you good morning.
Jonathan.
You've talked a little bit about vaccinations and your workforce. So I'm just I guess a couple of parts to this question.
One do you have.
The ability to kind of track which of your employees at the local level are actually been vaccinated.
I guess the other thing whats your expectation.
We as we go later into the year.
Foresee there'll be certain jobs, where there'll be restrictions that everyone on our site might have to be vaccinated in order to be able to do the work.
Okay.
Just to smiles, the beginning I've been vaccinated because of my age.
And between 59% and 60.
And the last day and I'm very happy about it.
Now no we don't know and we cannot force.
Our guys to be vaccinated evident.
What we can is just.
It's not only about education, but it's about communication, it's about promoting I'm just explaining it.
Through our internal channel.
And I think from being of being vaccinated.
And then I mean.
Obviously for our activities.
The quicker.
Is it better.
Alright, and then I guess the other part of the question is I know certainly the health regulations keep changing but.
You start thinking about things, where where folks were working maybe in remote areas and have to be working at our camps and things like that.
Do you foresee any anything that might mandate that anyone working on those sites would have to be vaccinated.
So far no but for example on site.
Alright.
Of BC just provided with.
Quite a number of vaccine and have begun some vaccination.
Painful.
It is a capped.
Com site.
So this is.
The trend at the moment and we shall see I think within the next week.
What is the evolution in our current can participate as the productivity at the Canada, depending on northern regulation to this movement.
Alright, alright ill leave it there thank you very much.
Okay. Your final question comes from the line of 90 day deal with industry Alliance.
Hi, good morning.
Just wanted to get your thoughts on a couple of ESG related priorities.
First off can you talk about any long term opportunities you're seeing some additional construction work on.
New decarbonization initiatives.
Wondering how youre thinking about your approach and positioning to capitalize on new opportunities infrastructure related.
Our new low or zero emission.
Projects in Canada.
I mean have you didn't see that.
There is a trend and.
I would say sort of supplementary pipelines that we just begin to see emerging it.
About all of those jobs.
Especially in energy I mean battery storage for example.
But also I mean, Joe Torre M earlier.
Why is it gets tricky.
King is a is rising that choose the difference of <unk> 10.
Temperature between some preoptic level of water or lately lake water and the atmosphere.
That's quite a number of very interesting and technical projects. What is also interesting is that.
There's a big chunk of them that go through private initiative within the public areas and we like it there may be some concession schemes.
There may be.
Public private partnership and.
It's very very important for us we have a team only dedicated.
Truck and assess all those new project coming.
And do you think that team.
It's sort of where you want it to be or do you think you need to make more investments either in capabilities or people to be able to sort of positioning yourself to capitalize on those opportunities.
We would have to recruit.
In addition to what we have at the moment we.
Dedicated team at the moment, but as I will say I mean 20 minutes ago, a wave that's coming and I think it's not going to be stopped.
So we have to be ready and.
We are extremely proactive you have seen I mean with the.
Our second sustainability report about our disclosure about our commitment. So we have to stay at the forefront of the construction industry in Canada, and most probably we will add.
More capacity to be there.
Okay.
Good day, Thank you and just a follow up to that.
<unk> share loss point Denise.
Sustainability report very clear new environmental targets clearly helped celebrate your ESG profile versus your competitors in the construction sector. I'm. Just wondering if you have any thoughts on additional targets that youre thinking about either on the environmental side or maybe on the social or governance side.
Hi.
I don't know what I can do better is that a zero net in 2016.
In 2015 fall what is sure is that where our top line focus today on consulting <unk> and.
And trying to make a good decision.
To be able to.
To go there.
So I think we have setup our targets now.
And from this I mean, we are relentlessly working to make it happen.
Okay I appreciate that thank you.
There are no other questions at this time.
Thank you very much everyone as always if there's any follow up questions feel free to reach out and we wish you a good rest of your day stay safe and we'll speak to you on the next call.
Okay.
This concludes today's conference call you may now disconnect.
[music].
Yes.