Q1 2024 AtkinsRéalis Earnings Call
Thank you for standing by.
Operator: Thank you for standing by. This is the conference operator. Good morning, and welcome to Atkins Reales' first quarter 2024 results conference call.
This is the conference operator.
Speaker Change: Morning, and welcome to Atkins reality first quarter 'twenty 'twenty four results conference call.
Operator: As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 0. I would now like to turn the conference over to Denis Jasmin, Vice President, Investor Relations. Please go ahead.
As a reminder, all participants are in a listen only mode and the conference is being recorded.
Speaker Change: After the presentation, there will be an opportunity to ask questions.
Speaker Change: To join the question queue you May Press Star then one on your telephone keypad.
Speaker Change: Should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
Speaker Change: I would now like to turn the conference over to Dennis Jasmine, Vice President Investor Relations. Please go ahead.
Denis Jasmin: Thank you. Bonjour tout le monde.
Denis Jasmin: Thank you.
Denis Jasmin: Hello, Good morning, everyone and thank you for joining us today.
Denis Jasmin: Good morning, everyone, and thank you for joining us today. For those who want to dive in, we invite you to view the slide presentation that we have posted in the investors section of our website, which we will refer to during this call. Today's call is also being webcast. With me today are Ian Edwards, Chief Executive Officer, and Jeff Bell, Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to one or two questions to ensure that all analysts have an opportunity to participate.
Speaker Change: For those dialing in we invite you to view the slide presentation that we posted in the investors section of our website, which we will refer to during this call. Today's call is also webcast with me today are you in other words, Chief Executive Officer, and just Bill Chief Financial Officer.
Speaker Change: Before we begin I would like to ask everyone to limit themselves to one or two questions to ensure that all of the list of the percentage, but state yeah, well attempt to return to the queue for any follow up questions.
Denis Jasmin: You are welcome to return to the queue for any follow-up questions. Now, I would like to draw your attention to slide two. Comments made on today's call may contain forward-looking information. This information, by its nature, is subject to assumptions, risks, and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these assumptions, risks, and uncertainties, please consult the relevant findings in SIDAR+. These documents are also available on our website.
Speaker Change: I would like to draw your attention to slide two comments made on today's call may contain forward looking information. This information by its nature is subject to assumptions risks and uncertainties and as such actual results may differ materially from the views expressed today.
Speaker Change: For further information on these assumptions risks and uncertainties. Please consult becomes relevant filings on SEDAR plus these documents are also available on our website.
Denis Jasmin: Also, during the call, we may refer to certain non-RFRS financials. Reconciliation of these amounts to the corresponding RFRS financial measures is reflected in our Earnings Relief NMDNA, which can be found on CDAR Plus. Now, I'll pass the call over to Ian Edwards. Ian? Thanks, Denis.
Speaker Change: Also during the call we may refer to certain non ferrous, but then just retail station of these amounts to the corresponding <unk>.
Financial measures are reflected in our earnings release, and MD&A, which can be found on SEDAR plus alright.
Speaker Change: Now ill pass the call over to you in other words.
Ian L. Edwards: Thank you, Denis. Good morning, everyone, and thanks for joining us today. I'm going to begin by providing an overview of our performance in the first quarter, our growing backlog, and the success we are seeing in our four engineering services regions and nuclear businesses. I'll then pass it over to Jeff to provide more detail on our financial results and our updated guidance before we open it up for Q&A. So let's get started on slide three.
Jenny: Thanks, Jenny good morning, everyone. Thanks for joining us today.
Jenny: I'm going to begin by providing an overview of our fourth.
Jenny: In the first quarter.
Jenny: Growing backlog.
Jenny: Success, we are seeing in our whole engineering services regions nuclear businesses.
Jenny: I'll then pass it over to Jeff to provide more detail on it.
Speaker Change: Actual results and our updated guidance before we open it up for Q&A. So let's get started on slide three.
Ian L. Edwards: We started 2024 on a strong note. The first quarter results are driven by the growing demand for our services to address the energy transition at Ageing Infrastructure. The measures we have taken to de-risk the company and focus on our core strengths are continuing to bear fruit. This was proven again this quarter by our top line and bottom line improvement over the first quarter of last year. Atkins Realest Services revenue increased 19%, with segment adjusted EBIT increasing 19.5% to approximately $187 million, driven by robust demand across our business. Backlog at the end of the first quarter of 2024 was approximately $15 billion, and represents another record high for the company as it grew 26% year over year. Operating cash flow was $37 million, a significant improvement compared to the first quarter of 2023, and in line with our expectations of delivering over $400 Net limited recourse and recourse debt to adjusted EBITDA ratio at the end of the quarter was 1.7 times, remaining in a 1.5 to 2 times target rate.
Speaker Change: We started 2024 on a strong note.
The first quarter results driven by the growing demand for our services to address the energy transition.
Speaker Change: Aging infrastructure the measures we've taken to Derisk the company.
Speaker Change: Focus on our core strengths is continuing to bear fruit.
Speaker Change: This was proven again this quarter by our topline and bottom line improvement over the first quarter of last year.
Speaker Change: Atkins reality services revenue increased 19% with segment adjusted EBIT increased 19, 5% to approximately $287 million driven by robust demand across our businesses.
Speaker Change: Backlog at the end of the first quarter of 2024 was approximately $15 billion and revert represents another record high for the company as it grew 26% year over year.
Speaker Change: Operating cash flow, which is $37 million of.
Speaker Change: A significant improvement compared to the first quarter of 2023.
Speaker Change: In line with our expectations of delivering over $400 million for the full year.
Speaker Change: Net limited recourse and recourse debt to adjusted EBITDA ratio at the end of the quarter was one seven times.
Speaker Change: And at 1.5 to two times target range.
Ian L. Edwards: Our recent results reinforce our position in the marketplace. The demand for our services is fuelled by the need to replace an aging infrastructure and provide clean, affordable, and secure energy solutions. Our historical execution track record makes us the partner of choice for public and private entities achieving their net zero goal.
Speaker Change: Our recent results reinforce our position in the marketplace.
Speaker Change: Trust services is fueled by the need to replace an aging infrastructure and provide clean affordable and secure energy solutions.
Speaker Change: Historical execution track record makes us the partner of choice for public and private entities, achieving net zero goals.
Ian L. Edwards: On slide four, we can see the progression of our backlog growth for Atkins Realist Services over the last year. Our 26% growth year-over-year was driven by key bookings across our core engineering services and nuclear business. The most significant contribution to the backlog in the quarter was due to taking over the Shung O&M contract, one of the largest hospital centers in Canada. We will be maintaining all of the hospital systems in support of medical operations, as well as the life cycle replacement management of all of the equipment until 2015.
On slide four we can see the progression of our buy.
Speaker Change: For growth for Atkins reality services over the last year.
26% growth year over year was driven by key bookings across our core engineering services on nuclear businesses.
Speaker Change: The most significant contribution to the backlog.
Speaker Change: In the quarter was due to taking over the show O&M contracts one of the largest hospital centers in Canada.
Speaker Change: We will be maintaining all of the hospital systems in support of medical operations as well as the lifecycle replacement management of all of the equipment until 2050.
Ian L. Edwards: Additionally, we saw strong backlog growth in the UK and the US engineering services regions during the course of the year. We also continued to capture projects across many of the end markets and regions in which we operate. In the U.S., we continued to strengthen our relationship with the Georgia Department of Transportation.
Speaker Change: Additionally, we saw strong backlog growth in the UK and the U S engineering services regions in the quarter.
Speaker Change: We also continue to capture projects across many of the end markets and regions in which we operate.
Speaker Change: In the U S. We continue to strengthen our relationship with the Georgia Department of transportation and in the U K, we continue to provide design and construction management services for the rail network signaling.
Ian L. Edwards: And in the U.K., we continue to provide design and construction management services for the rail network. Turning to slide five, our engineering services business continues to generate robust, organic top-line growth, as we witnessed an 18% increase year-over-year in the first quarter. Our revenue generation was driven by the continuation of our ability to secure new wins across our geographic scope. Segment-adjusted EBITDA over net revenue margin improved 15% during the quarter. We continue to increase our backlog, which now stands at just below $12 billion, representing a 19% growth versus our backlog as of March 31, 2023. As mentioned on our last earnings call, we have changed our operational structure, and therefore, starting on slide six, we will provide an overview of each of our four regions and of their performance.
Speaker Change: Turning to slide five our engineering services business continues to generate robust organic topline growth as we witnessed an 18% increase year over year in the first quarter.
Speaker Change: Our revenue generation was driven by the continuation of our ability to secure new wins across our geographic scope.
Segment adjusted EBITDA over net revenue margin improved 15% during the quarter.
Speaker Change: We continue to increase our backlog, which now stands at just below $12 billion represented a 19% growth versus our backlog as of March So as you walk 2023.
Speaker Change: And as mentioned on our last earnings call, we have changed our operational structure and therefore, starting on slide six we will provide an overview of each of our full regions and of that performance.
Speaker Change: Okay.
Ian L. Edwards: Starting with Canada, organic revenue grew 22% year over year, as we saw continued strength in our ability to service transportation, industrial, and power renewables en masse. Segment-adjusted EBITDA was $22 million, representing approximately 12% market share.
Speaker Change: So starting with Canada organic revenue grew 22% year over year as we saw continued strength in our ability to service, the transportation industrial and power and renewables and markets.
Segment, adjusted EBITDA was $22 million, representing approximately 12% margin.
Ian L. Edwards: We're having success in attracting and retaining high-quality employees, bolstering our position in the marketplace with deep expertise across our talent base. Looking ahead, we continue to see a pipeline full of opportunities. Our leading position provides a strong foundation as we continue to grow customer relationships and capture additional wallet share through our end-to-end capabilities across the entire lifecycle of projects. As we focus on enhancing the depth and breadth of our team in Canada, we see an opportunity to increase our position in provinces across the country that are focused on bolstering their transport properties and achieving net zero goals. In the UK and Ireland, we continue to recruit key women, particularly in the defense, water, transportation, power, and renewables sectors.
Speaker Change: We're having success in attracting and retaining high quality employees bolstering our position in the marketplace with deep expertise across a talent base.
Speaker Change: Looking ahead, we continue to see a pipeline full of opportunities.
Speaker Change: Our leading position provides a strong foundation as we continue to grow customer relationships and capture additional wallet share through our end to end capabilities across the entire lifecycle of projects.
Speaker Change: As we focus on enhancing the depth and breadth of our team in Canada, we see an opportunity to increase our position and provinces across the country that are focused.
Speaker Change: Focused on bolstering that transport provinces.
Speaker Change: Overall goals.
Speaker Change: In the UK and Ireland, we continue to capture key wins.
Particularly in the defense water transportation and power and renewables and markets.
Ian L. Edwards: Organic revenue grew to 5% versus the first quarter of 2023, while segment-adjusted EBITDA grew to $74 million, representing a margin over net revenue of 15.5%. We saw continued backlog growth during the first quarter to $1.7 billion, primarily through new work orders in the transportation and market. This was particularly the case in the Network Rail project, which is a key transportation line for more than 20% of UK citizens in their daily commute, in addition to this project.
Speaker Change: Revenue grew two 5% versus the first quarter of 2023.
Speaker Change: While segment adjusted EBITDA grew to $74 million, representing a margin of a net revenue of 15, 5%.
Speaker Change: We saw continued backlog growth during the first quarter to $1 $7 billion, primarily through new workers in the transportation end market.
Speaker Change: This was particularly the case in the network rail project, which is the key transportation line for more than 20% of U K citizens and their daily commute.
Ian L. Edwards: We're also at key wins in aviation, water infrastructure, and climate resiliency. We have long-standing relationships with the government, which enable our continued growth. We continue to add to our market share and increase our backlog as leading providers of engineering services across the region. Results this quarter and our historical execution highlight the resiliency of our business during times of economic uncertainty. In the U.S. and Latin America, we saw a continued growth trajectory led by our work in transportation, renewable energy, minerals and metals, and much more.
Speaker Change: In addition to this project. We also had key wins in aviation water infrastructure and climate resiliency, where our long standing relationships with the government.
Speaker Change: Enabled our continued growth.
Speaker Change: We continue to add to our market share and increase our backlog as leading providers and engineering services across the region.
Speaker Change: Results this quarter and our historical execution highlights the resiliency of our business during times of economic uncertainty.
Speaker Change: In the U S and Latin America, we saw a continued growth trajectory led by our work and transportation power renewables minerals and metals end markets organic revenue grew 13% year over year, while segment adjusted EBITDA fell slightly to 46 million.
Ian L. Edwards: Organic revenue grew 13% year-over-year, while segment-adjusted EBITDA fell slightly to $46 million. The year-over-year decrease in profitability was mainly due to storm recovery work with FEMA during the first quarter of 2023 that did not repeat itself this year.
Speaker Change: The year over year decrease in profitability was mainly due to storm recovery work with FEMA during the first quarter of 2023.
Speaker Change: No repeat itself this year.
Ian L. Edwards: The backlog increased approximately 9% year over year from its significant framework wins in transportation, and the pipeline of opportunities continues to look robust. As you will hear more during our Investor Day next month, our land and expand strategy is working. We have deep relationships with several departments of transportation across the U.S., and we are methodically increasing our foothold in Hyde Road City Center. Looking ahead, we see steady volume for this business as major cities continue to address their aging infrastructure, particularly in the transportation market.
Speaker Change: The backlog increased approximately 9% year over year from a significant framework wins in transportation and the <unk>.
Speaker Change: Lifeline of opportunities continues to look robust.
Speaker Change: As you will hear more during our Investor day next month, a land and expand strategy is working.
Speaker Change: We have deep relationships with several departments of transportation across the U S and we have methodically increasing our foothold.
Speaker Change: High growth city centers.
Speaker Change: Looking out we see steady volume for this business as major cities continue to address the aging infrastructure, particularly in the transportation market the pipeline of infrastructure construction in the U S continues to be very strong and as I expected to see significant annual growth over the next several years.
Ian L. Edwards: The pipeline of infrastructure construction in the U.S. continues to be very strong, and it's expected to see significant annual growth over the next several years. And we will be steadfast in our approach to investing for growth to expand across the U.S. to ensure we are winning our share of potential new contracts. Moving to slide 9, and the AMIR region, we welcomed Christine Healy as our new president in the quarter, with a mandate to drive engineering services growth in the region.
Speaker Change: And we will be steadfast in our approach to investing for growth to expand across the U S to ensure we are winning share.
Speaker Change: Central new contracts.
Speaker Change: Moving to slide nine in the EMEA region, we welcomed Christine Healy as our new president in the quarter with a mandate to drive engineering services grows and the region.
Ian L. Edwards: She brings a wealth of operational experience and a global perspective, which will enrich our strategic approach to capitalise on growing opportunities we see in Asia, the Middle East, and Australia for our services. I'm really excited to have her join our leadership team.
Christine Healy: She brings a wealth of operational experience and a global perspective, which will enrich our strategic approach to capitalize on growing opportunities. We see in Asia, The Middle East and Australia Cross services I'm really excited to have her join our leadership team.
Ian L. Edwards: In the first quarter, results in the region were really strong as organic revenue grew 58% versus the first quarter of 2023. This performance was mainly driven by an increase in the volume of delivered work on major projects for which we are contracted in the Middle East. Our performance in the quarter led to a segment-adjusted EBITDA of $35 million, an increase of 75% compared to the prior year, and represented an 18% margin over net revenue.
Christine Healy: In the first quarter results in the region were really strong as organic revenue grew 58% versus the first quarter of 2023.
Christine Healy: This performance was mainly driven by an increase in volume of deliberate work on major projects for which we have contracted in the middle East.
Christine Healy: Four months in the quarter led to a segment adjusted EBITDA of $35 million, an increase of 17, 5% compared to the prior year and represented an 18% margin over net revenue.
Ian L. Edwards: Total backlog in EMEA grew 23% as we captured opportunities in buildings and places, transportation, and marketing. I'd now like to move to slide 10 and the results of our nuclear bill. We continue to demonstrate robust growth, with an organic revenue increase of 21% in the quarter compared to the first quarter of 2023. Our nuclear backlog is $1.8 billion, which represents an 87% growth versus our backlog as at March 31, 2023, driven by higher bookings in the second half of last year, related primarily to our can-do refurbishment and services business. Segment-adjusted EBIT as a percentage of segment revenue was 13% in the quarter.
Christine Healy: Total backlog grew 23% as we captured opportunities and buildings in places and transportation end markets.
Christine Healy: And now let's move to slide 10, and the results of our nuclear business.
Christine Healy: We continue to demonstrate robust growth with an organic revenue increase of 21% in the quarter compared to the first quarter of 2023.
Christine Healy: Nuclear backlog is $1 $8 billion, which represents an 87% growth versus our backlog at March 31, 2023, driven by higher bookings in the second half of last year related primarily to our can do.
Christine Healy: And services business.
Christine Healy: Segment, adjusted EBIT as a percent.
Christine Healy: <unk> segment revenue was 13% in the quarter.
Ian L. Edwards: On slide 11, we highlight the achievements in each of the nuclear services that we provide. As we look across our markets, we see a continued increase in the pipeline of opportunities for large and small nuclear new builds. We're seeing strong activity in our UK operations through Hinkley Point and Sidespot. In February, we successfully launched the Canadians for CanDo campaign, which promotes the deployment of CanDo nuclear technology in support of Canadian and global efforts to reach net zero emissions. So far, we have strong support from Canadian stakeholders, and we're excited about the potential of this campaign. Additionally, we are collaborating with AECL to accelerate the development of the Kandu Monarch reactor.
Christine Healy: On slide 11, we highlight the achievements in each of the nuclear services that we provide.
Christine Healy: As we look across our markets, we see a continued increase in the pipeline of opportunities for large and small nuclear new builds we're seeing strong activity in our UK operations through Hinkley point and science, Paul and.
Christine Healy: In February we successfully launched the Canadians for can do campaign, which promotes the deployment of 10, new nuclear technology in support of Canadian and global efforts to reach net zero emissions.
Christine Healy: So far we have a strong support from Canadian stakeholders I'm worried.
Christine Healy: Excited about the potential of this campaign.
Christine Healy: Additionally, we are collaborating with ACL to accelerate the development of the can do them on a reactor.
Ian L. Edwards: This intellectual property, championed by the Canadian government, is on track to be a game-changer for the future of nuclear energy across the globe. Our exclusive rights to this technology step us up for a long runway for growth. I'm excited for our team to provide you with more information regarding nuclear power at our Investor Day in June. In Ontario, we are actively working on can-do life extensions at Darlington and Bruce Power. We continue to see growth opportunities in Ontario as the government recently announced a program to refurbish the Pickering nuclear power station. This will extend the plant's life by 30 years and help meet a projected surge in Ontario's electricity demand.
Speaker Change: This intellectual property championed by the Canadian government is on track to be a game changer for the future of nuclear across the globe.
Speaker Change: Our exclusive rights to this technology sets us up for a long runway for growth.
Speaker Change: Sighted for our team to provide you with more information regarding nuclear at our Investor Day in June.
Speaker Change: In Ontario, we are actively working on can do life extensions at Darlington and Bruce power, we continue to see growth opportunities in Ontario is the government recently announced a program to refurbish the Pickering nuclear power station.
Speaker Change: This will extend the plants alive by 30 years and helped me a projected Serge.
Imperial's electricity demand.
Ian L. Edwards: Early work on this project is already underway. In Europe, work on our CANDU retube and refurbishment program at the CERN Evola plant in Romania is progressing well, and we continue to advance the potential opportunity for a new build contract for the Sernicova 3 and 4 units. This is a pivotal project for the country, as it supplies electricity to approximately 20% of Romanians, and we are thrilled to be engaged in this great work on Waste Management and Decommissioning.
Speaker Change: Work on this project is already underway.
Speaker Change: In Europe, we're kind of Camden, retooled and refurbishment program at the Nevada plant in Romania is progressing well.
Speaker Change: And we continue to advance the potential opportunity for a new build contracts of incentive over three and four units.
Speaker Change: This is a pivotal project for the country.
Speaker Change: <unk> electricity to approximately 20% of Romanians and we are thrilled to be engaged in this Greg woods.
Speaker Change: On waste management and decommissioning.
Ian L. Edwards: We have a strong pipeline of national security work at disposal facilities in the UK and the US. A longstanding position in these markets and our recognized expertise have allowed us to continue to win new work. The near-term and long-term nuclear growth opportunity for Atkins Reales is significant, and the demand for our services continues to grow quarter over quarter. We are constantly harnessing our capabilities across the globe to be trusted partners to governments and utilities as they seek to achieve their net zero goals.
Speaker Change: We have a strong pipeline of national security work.
Speaker Change: Disposal facilities in the UK and the U S. A longstanding position in these markets and our recognized expertise has allowed us to continue to win new work.
Speaker Change: The near term and long term nuclear growth opportunity for Atkins reality is significant.
Speaker Change: And the demand for our services continues to grow quarter over quarter.
Speaker Change: We are constantly harnessing okay capabilities across the globe to be trusted partner to governments and utilities.
Speaker Change: They seek to achieve net zero goals.
Ian L. Edwards: Now moving to slide 12, our links on LSDK projects and capital business. Our LinkedIn segment saw a 30% year-over-year organic revenue growth in the first quarter, continuing its momentum from the first quarter of 2023, and realized an EBIT of $2 million. Backlog $1.5 billion at the end of the first quarter was 47% higher than the first quarter of last year. Commissioning and testing on our Ontario LSDK project are continuing as planned.
Speaker Change: Now moving to slide 12, and a linked some LST K projects and capital businesses.
Speaker Change: I'll leave some segment, so a 30% year over year organic revenue growth in the first quarter continuing its momentum from the first quarter of 2023.
Speaker Change: And realized an EBIT of $2 million backlog, one $5 billion at the end of the first quarter was 47% higher than the first quarter of last year.
Speaker Change: Commissioning and testing on our Ontario L. S. Teekay proteins is continuing as planned.
Ian L. Edwards: Our backlog decreased 42% to $299 million at the end of the first quarter, primarily representing the REM project, which continues to progress well. As we finalize the LSTK projects for our clients, we continue to pursue claim recoveries that we believe we are owed, and these discussions remain ongoing with our clients. On capital, first quarter EBIT decreased mainly due to a revised estimate on a financial asset held in one of our investments.
Speaker Change: Our backlog decreased 42% to.
Speaker Change: $299 million at the end of the first quarter, primarily represents in the rent projects, which continues to progress well.
Speaker Change: As we finalize the Alice Teekay projects for our clients. We continue to pursue claim recoveries that we believe we are road and these discussions remain ongoing with our client.
Speaker Change: On capital first quarter EBIT decreased mainly due to a revised estimate on a financial asset housing one of our investments we.
Ian L. Edwards: We did not receive a dividend from Highway 407 in Q1. However, traffic has continued to increase year over year, and they recently announced a dividend for the second quarter, which will be $12 million for Atkins Railway. I'm now turning over to Jeff to discuss the financial results.
Speaker Change: We did not receive a dividend from highway 470 queue ball. However, traffic has continued to increase year over year and they recently announced a dividend in the second quarter, which will be $12 million for Atkins rabbits.
Speaker Change: I'll now turn it over to Jeff to discuss the financial results.
Speaker Change: Okay.
Jeffrey Allan Bell: Thank you, Ian, and good morning, everyone. Turning to slide 14, total revenues for the quarter increased 12% year-over-year, totaling $2.3 billion. Atkins Real Estate Services revenue totaled $2.2 billion, representing an organic revenue growth of 19% compared to the same quarter last year. Total segment-adjusted EBIT for the quarter was $175 million, 10% higher than last year, and was comprised of $187 million for Atkins Real Estate Services and $-13 million for LSDK Protech. Atkins Real's engineering services-adjusted EBIT was 19% higher than last year, and operating margins, segment-adjusted EBITDA to net revenue, increased 50 basis points compared to Q1 2023, as the business continues to drive productivity improvements and cost efficiency. Nuclear EBIT increased 18%, while margins were relatively flat year-on-year at 13%.
Jeff: Thank you Ian and good morning, everyone.
Jeff: Turning to slide 14, total revenues for the quarter increased 12% year over year totaling $2 $3 billion.
Jeff: <unk> services revenue totaled $2 2 billion.
Jeff: Representing an organic revenue growth of 19% compared to the same quarter in 2023.
Jeff: Total segment adjusted EBIT for the quarter was $175 million, 10% higher than last year and was comprised of $187 million for Atkins rehab services and negative $13 million for Atlas Teekay projects.
Jeff: Atkins reality engineering services, adjusted EBIT was 19% higher than last year and operating margins segment adjusted EBITDA to net revenue increased 50 basis points compared to Q1 2023.
Jeff: As the business continues to drive productivity improvements and cost efficiencies.
Jeff: Nuclear EBIT increased 18%, while margins were relatively flat year on year at 13% we.
Jeffrey Allan Bell: We expect full-year profitability to be somewhat weighted to the second half. Corporate SDNA expenses from PSNPM totaled $40 million in the quarter, compared to $29 million last year, mainly driven by higher long-term compensation costs, primarily as a result of the recent significant share price rise. As a result, we anticipate the corporate FD&A expenses from PSMPM will be approximately $130 million for full year 2024. Net financial expenses for the quarter were $38 million, $9 million lower than Q1 2023, due largely to a lower level of gross debt and favorable foreign exchange variation.
Jeff: We expect full year profitability to be somewhat weighted to the second half.
Jeff: Corporate SG&A expenses from <unk> totaled $40 million in the quarter compared to $29 million last year, mainly driven by higher long term compensation costs, primarily as a result of the recent significant share price rise.
Jeff: As a result, we anticipate that the corporate SG&A expenses from <unk> P. M will be approximately $130 million for full year 2024.
Jeff: Net financial expenses for the quarter with $38 million $9 million lower than Q1, 2023, due largely to a lower level of gross debt and favorable foreign exchange variations.
Jeffrey Allan Bell: We expect this level of quarterly expense to continue for the rest of the year. Note that our income tax rate on our adjusted PS and PMTED income for the first quarter was 24%. We continue to expect this rate for full-year premiums in U4 to be closer to the Canadian statutory income tax rate of $26 million.
Jeff: We expect this level of quarterly expense to continue for the rest of the year.
Jeff: Note that our income tax rate on our adjusted <unk> net income for the first quarter was 24%.
Jeff: We continue to expect this rate for full year Q4 to be closer to the Canadian statutory income tax rate of 26%.
Jeffrey Allan Bell: The IFRS net income this quarter was 64% higher than Q1 2023 and totaled $46 million. This was composed of a net income from PS and PM of $53 million and a net loss from capital of $7 million. Adjusted EPS from PSMPM for the quarter was $0.42 per diluted share, a 31% increase compared to $0.32 in the first quarter last year.
Jeff: <unk> net income this quarter was 64% higher than Q1 2023.
Jeff: And totaled $46 million.
Jeff: This was composed of a net income from <unk> P M, a $53 million and a net loss from capital of $7 million.
Jeff: Adjusted EPS from <unk> P. M for the quarter was 42 cents per diluted share a 31% increase compared to 32 cents in the first quarter last year.
Jeffrey Allan Bell: And backlog ended the quarter at $15.6 billion, 10% higher than at the end of last year, and 23% higher than at the end of March 2023, with a strong book-to-bill ratio in engineering services, particularly in the UK and the US. Now we move on to slide 15, and free cash flow and leverage. Net cash generated from operating activities totaled $37 million for the quarter. This was mainly driven by strong EBITDA delivery and working capital management in Atkins Reales Services.
Jeff: And backlog ended the quarter at $15 $6 billion, 10% higher than at the end of last year and 23% higher than at the end of March 2023, with a strong book to Bill ratio in engineering services, particularly in the U K U S.
Speaker Change: If we now move on to slide 15, and free cash flow and leverage.
Speaker Change: Net cash generated from operating activities totaled $37 million for the quarter. This.
Speaker Change: This was mainly driven by strong EBITDA delivery and working capital management and Atkins reality services.
Jeffrey Allan Bell: Atkins Reality Services generated operating cash flows of $271 million in the first quarter. After cash taxes, interest, corporate items, and capital, we generated $137 million of operating cash flow, and, including LSTK projects, $37 million. After CapEx and the payment of lease liabilities, our free cash flow stood at negative $11 million for the quarter.
Speaker Change: Atkins reality services generated operating cash flows of $271 million in the first quarter.
Speaker Change: After cash taxes interest corporate items and capital, we generated $137 million of operating cash flow and including Alex to get projects $37 million.
Speaker Change: After capex and the payment of lease liabilities, our free cash flow stood at negative $11 million for the quarter.
Jeffrey Allan Bell: As indicated during our last earnings call, we expect continued revenue and EBITDA growth in 2024 from the services business and significantly lower cash outflows from the LSDK projects compared to full year 2023. As a result, we anticipate that the net cash generated from operating activities for the company should be in excess of $400 million for the full year, but weighted to the second half as LSTK outflows reduce and services cash flows grow.
Speaker Change: As indicated during our last earnings call. We expect continued revenue and EBITDA growth in 2024 from our services businesses and significantly lower cash inflows from the Alice Teekay projects compared to full year 2023.
Speaker Change: As a result, we anticipate that the net cash generated from operating activities for the company should be in excess of $400 million for the full year, but weighted to the second half as Ellis Teekay outflows reduce and services cash flows grow.
Jeffrey Allan Bell: Capital expenditure was $25 million in the quarter, and we continue to forecast full-year expenditure in a range of $140 to $160 million, as the investment in our Can-Do Monarch nuclear reactor development ramps up over the year. I'd like now to turn to my final slide, slide 16, and updates to our Fleet Year Guide. With respect to nuclear, the demand for our services continues to grow, and our backlog is strong. Therefore, we are increasing our nuclear organic revenue growth for full year 2024 from between 12% and 15% to between 15% and 20%.
Speaker Change: Capital expenditure was $25 million in the quarter.
Speaker Change: And we continue to forecast full year expenditure in a range of $140 million to $160 million as the investment in our can't do monarch nuclear reactor development ramps up over the year.
I'd like now to turn to my final slide Slide 16.
Speaker Change: Updates to our full year guidance.
Speaker Change: With respect to nuclear the demand for our services continues to grow and our backlog is strong and therefore, we are increasing our nuclear organic revenue growth for full year 'twenty 'twenty four from between 12% and 15% to between 15% to 20%.
Jeffrey Allan Bell: Also, in line with my previous comments, we are adjusting our 2024 outlook on corporate SG&A from PS&PM to approximately $130 million. All other financial metrics for full year 2024 remain unchanged. With that, I'll now hand the presentation back to you. Thank you, Jeff.
Speaker Change: Also in line with my previous comments, we are adjusting our 2020 for outlook on corporate SG&A from P. S. N P M to approximately $130 million.
Speaker Change: All other financial metrics for full year 2024 remains unchanged.
Speaker Change: With that I'll now hand, the presentation back to you.
Jeff: Thank you Jeff.
Ian L. Edwards: We had a strong start to the year with key wins across our four engineering services regions and nuclear business. Our record backlog highlights our long-run rate for growth and the significant demand for our services.
Speaker Change: Had a strong start to the year with key wins across our four engineered services regions our nuclear business.
Speaker Change: Our record backlog highlights a long runway for growth and the significant demand for our services.
Ian L. Edwards: We continue to purposely expand our capabilities across our region and to capture the continued growth we anticipate from the energy transition super cycle and aging infrastructure replacement. We are deploying our global capabilities locally to win new business, and we are deploying operational excellence initiatives across the company through the work of our Chief Operating Officer's Office. I'm extremely proud of the work the team continues to do to create a better future for the planet and its people.
Speaker Change: We continue to purposely expand our capabilities across our regions.
Speaker Change: To capture the continued growth, we anticipate from the energy transition Super cycle and aging infrastructure replacement.
Speaker Change: We are deploying our global capabilities locally to clients to win new business and we are deploying operational excellence initiatives across the company through the work of our Chief operating officers office.
Speaker Change: I'm extremely proud of the work the team continues to do to create a better future for the planet and its people we.
Ian L. Edwards: We are building an authentic culture founded on collaboration and a drive towards excellence. Through this, we are able to attract market-leading talent. I'm grateful for the loyalty of our 38,000 employees and their dedication to achieving our goals. We look forward to providing you with more details on the work we are accomplishing under our new organizational structure, our future growth plans, and our updated long-term financial outlook at our Investor Day on June 13th in Toronto. We really hope you can join us. So with that, let's open it up to questions.
Speaker Change: We are building an authentic culture founded on collaboration and a drive towards excellence through this we are able to higher market, leading talent I'm grateful for the loyalty about 38000 employees and their dedication to achieving our goals.
Speaker Change: We look forward to providing you with more details on the work we are accomplishing under a new organizational structure.
Speaker Change: Our future growth plans.
Speaker Change: Data long term financial outlook at our Investor Day on June 13th in Toronto, We really hope you can join us so with that let's open it up to questions.
Over to you today.
Operator: Yeah, I can open the line for questions.
Speaker Change: Yes, we can open the line for questions.
Operator: We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone to acknowledge a request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as other callers join the queue. The first question comes from Yuri Lynk with Canicord Genuity. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To join the question queue you May Press Star then one on your telephone keypad.
Speaker Change: You will hear a tone to acknowledge your request.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing any Keith.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: We will pause for a moment of college joined the queue.
Speaker Change: The first question comes from Yuri Lynk with Canaccord Genuity. Please go ahead.
Yuri Lynk: Good morning and congratulations on a strong start to the year. I will just start with the engineering services regions segment. A strong start, 17% revenue growth. You left the guidance of 8 to 10% unchanged. Just wondering, so obviously that's implying the growth kind of slows to high single digits against some tough comps, but just like the cadence there, I mean, do we see another strong year-on-year comp in Q2 before the growth really starts to slow down in the second half? Or how do we think about that?
Yuri Lynk: Good morning, and congrats on a strong start to the year.
Speaker Change: Mike.
Speaker Change:
Speaker Change: Just start with the engineering services regions segment.
Strong start a 17% revenue growth you left the guidance.
Speaker Change: <unk> percent to 10% unchanged.
Just wondering the so that's obviously that's implying you know the growth kind of slows to high single digits against some tough comps, but how are you.
Speaker Change: Just like the cadence there I mean do we see another strong year on year comp in Q2 before that really starts to the growth really starts to slow down and in the second half or how do we think about that.
Ian L. Edwards: Yeah, that's obviously a fair question. First of all, we're really pleased with our growth in engineering services. I think it's a proof point that the measures we've put in place through the Pivoting to Growth strategy are really working. Now, clearly, we're in Q1. We set out and forecast what we believed was the growth trajectory through the four regions that we created. We've obviously had a really good start to the year in Q1, and we will continue to look at the trajectory through Q2 and see how that plays out.
Speaker Change: Yes, obviously fair question I mean.
Speaker Change: First of all what we're really pleased.
Speaker Change: With a growth in engineering services I think it's a it's.
Speaker Change: It's a proof point.
The measures we've put in place through the pivoting to growth strategy.
Speaker Change: Really working.
Now clearly we're in Q1.
Speaker Change: We set out.
Speaker Change: Forecast, what we believed was the growth trajectory through the four regions that we've created.
Speaker Change: We've.
Speaker Change: Obviously, you had a really good start to the year in Q1.
Speaker Change: And we will continue to look.
Speaker Change: The trajectory through Q2.
Speaker Change: And see how that plays out I mean.
Ian L. Edwards: Generally, we've got a lot of tailwinds in the markets where we position the business, both in geographic markets and also in the end market. But we do want to just see how this plays out through the next quarter before we make any kind of further prediction for the end of the year.
Speaker Change: Generally we've got a lot of tailwind in the markets, where we've <unk>.
Speaker Change: Positioning the business, both geographic markets and also the end markets.
Speaker Change: But we do want to just see how this plays out.
Speaker Change: The next quarter before we would make any any kind of further predictions for the end of the year.
Ian L. Edwards: Okay, and just to follow up there. Last year, that segment delivered very strong growth, but the EBITDA margin, I think it's fair to say, left us all wanting a little bit more. Now you're delivering the growth and the EBITDA margin expansion, so what's different this year? What are you doing to drive that margin higher, or is it just operating leverage finally kicking in?
Speaker Change: Okay, and just a follow up there I mean.
Speaker Change: Last year.
Speaker Change: That segment are delivered.
Speaker Change: Very strong growth, but the EBITDA margin I would I think it's fair to say left a fall one thing a little bit more.
Speaker Change: Now, you're you're delivering the growth and the EBITDA margin.
Speaker Change: Expansion so what's what's different this year like what are you doing to drive that margin higher or is it just operating leverage finally kicking in.
Ian L. Edwards: Well, let me answer that in a bit of a longer way about our Margin Expansion Plan because we've been very, very deliberate in developing a plan through the Chief Operating Officer's office with Chief Operating Officer, Phil Hall, that we really put in place towards the end of last year with the new organizational structure and is now beginning to take effect. Um... You will see, and we will explain this in a lot more detail at Investor Day, and obviously, we'll put out a longer-range aspiration of margin expansion. It is really pleasing to see the 50 basis point improvement year over year from 14.5 to 15. And the way that I think about this is to kind of simplify it.
Speaker Change: Well, let me let.
Speaker Change: Let me maybe answer that in a bit of a longer way about our margin expansion plan, because we've been very very deliberate and developing a plan through the chief operating officer's office was the chief operating office to fill a hole that we really put in place towards the end of last year with the new organizational structure.
Speaker Change: Now beginning to take effect.
Speaker Change: <unk>.
Speaker Change: You will see and we will explain this in a lot more detail at the Investor day, and obviously, we will put out a longer range aspiration of margin expansion.
Speaker Change: Really pleasing to see the 50 basis point improvement year over year from 14 to 15.
Speaker Change: And the way that I think about this.
Speaker Change: Kind of simplify it.
Ian L. Edwards: We've got two approaches; the first is really specific business decisions and actions like the divestment of Scandinavia or like exiting. [inaudible] But we've also put in group initiatives, and these group initiatives are driven into the business through the COO around utilization of our resources. I mean, you know, our resource in the professional services business, we can improve that utilization by basis points. That adds a good bottom-line improvement. The GTC usage, you know, our global technology center in India, the more usage we get out of that, the more profitable we can be, and we're driving more usage out of that.
Speaker Change: We've got two approaches.
Speaker Change: The first is really specific business decisions and actions like the divestment of Scandinavia or like exiting specific business lines that are low margin businesses.
Speaker Change: <unk>.
Speaker Change: It has been applied to Canada over the last six months or so.
Speaker Change: We've seen margins now in Canada, we turn into.
Speaker Change: A better place and obviously the journey needs to continue.
Speaker Change: But we've also put in group initiatives.
Speaker Change: These group initiatives being driven into the business through the C O O around utilization of our results I mean, you know Oh.
Speaker Change: Our resource on the professional services business, we can improve that utilization by basis points that that is a good bottom line improvement the.
Speaker Change: The GTC usage.
Speaker Change: Global Technology Center.
Speaker Change: In India, the more usage, we get out of that the more profitable we can be and we're driving more use out of that and then overhead reduction the cost of doing business.
Ian L. Edwards: And then overhead reduction, the cost of doing business, you know; we have a very granular plan on how to drive costs, both within the businesses and in the corporate overhead, to improve our efficiency as much as we possibly can. And as you will see, we're at the bottom of the range that we put out for this year, so we would expect some improvement during the course of the year and more to come at Invest Today. So I would say the answer is a really methodical, granular approach to margin expansion.
Speaker Change: We have a very granular plan, so how to drive cost.
Speaker Change: Both within the businesses and then the corporate overhead.
Speaker Change: To improve our efficiency.
Speaker Change: As we possibly can.
Speaker Change: As you will see.
Speaker Change: But where we're at the bottom of the range that we put out for this year. So we would expect some improvement during the course of the year and more to come at the Investor Day. So I would say the answer is a really a methodical granular approach to margin expansion.
Unknown Speaker: That's helpful. I'll turn it over. Thanks.
Speaker Change: That's helpful.
Speaker Change: Turn it over thanks.
Benoit Poirier: The next question comes from Benoit Poirier with Desjardins Capital Markets. Please go ahead.
Speaker Change: The next question comes from Wanwa Korea, with today's shutdowns capital markets. Please go ahead.
Benoit Poirier: Yeah, good morning, Ian and Jeff, and congrats on the first quarter results. Just to come back on the previous question, obviously, impressive organic growth with both nuclear and generating services, and a great explanation of the corporate SG&A. When we look at engineering services, you came toward the lower end of the margin range for the year. Could you maybe provide a little bit more details? I know it's an improvement versus the 50 bps versus last year, but is it kind of normal seasonality, or what can you say about the operating leverage and the opportunity to improve the Canada EBIT margin, which stood at 4.3% in the quarter?
Speaker Change: Yeah, good morning, yen and Jeff and congrats for the first quarter results.
Speaker Change: Morning.
Speaker Change: Just to come back on the previous question, obviously impressive organic growth with bolt nuclear engineering services, great explanation about the corporate G&A.
Speaker Change: And when we look at the Engineering services you came out towards the lower end of the margin range for the year. So could you maybe provide a little bit more details I know its an improvement versus the 50 bps versus last year, but is it kind of normal seasonality or what can you say.
Speaker Change: How about the operating leverage in.
Speaker Change: You're fortunate to improve Canada, EBIT margin that that stood at four 3% in the quarter.
Jeffrey Allan Bell: Yeah, Benoit. It's Jeff. Why don't I jump in on that? So just in answer to a couple of elements of the question there, you're absolutely right. From a seasonality perspective, as we've seen in previous years, it does tend to be, you know, a lower set of margins at the beginning of the year that strengthens over the course of the year itself, which to Ian's point is why, you know, we're quite confident of being in the 15 to 17% range that we put out as guidance.
Speaker Change: Yes that was it's Jeff Wonder why don't I jump in on that so just in an answer to a couple of elements of the question there.
Speaker Change: You're absolutely right.
Speaker Change: The analogy perspective, as we've seen in previous years does tend to be a lower set of margins at the beginning of the year strengthens over the course of the year itself.
Speaker Change: The end point is why we're quite confident of being in the 15% to 17% range that we put out as guidance, obviously, 15% in the first quarter or is that the lower end, but.
Jeffrey Allan Bell: Obviously, 15% in the first quarter is at the lower end. But, you know, as we typically see, we'd expect that to strengthen over the quarter as we go. You know, but particularly in Canada, we are seeing good year-on-year progress on a number of the initiatives that Ian has talked about, both at a group level and from a more granular level within the business. And again, obviously, that's the region where we have the most, in a sense, blue water to go after, in terms of getting those margins up to be similar to, you know, the rest of the organization. And, you know, we have a clear path to do that in the short to medium term.
Speaker Change: As we typically see we'd expect that to <unk>.
Speaker Change: To strengthen over the over the quarter as we go.
Speaker Change: But particularly in Canada, we are seeing a good year on year progress in particular for a number of the initiatives.
Speaker Change: That he has talked to you both.
Speaker Change: From a group level and from a more granular level within the business and again, obviously, that's the region, where we have the most.
Speaker Change: In a sense blue water to go after in terms of getting those margins up to be similar to the rest of the organization and we have a clear path to do that over the short to medium term, yeah, I mean, I wouldn't say that.
Ian L. Edwards: The New Organizational Structure Stephanie Vallancourt focused entirely on the Canadian business. You'll see that we've driven margins from 9.4% to 11.7% year-over-year, and that plan is working, and we will expect to see further improvement in that plan through the course of the year. So, thanks.
Speaker Change: Again, the new organizational structure is Stephanie violent focused entirely on the Canadian business.
Speaker Change: You'll see that we've driven margins from nine 4% to 11.
Speaker Change: 7% year over year.
Speaker Change: And that plan is working and we will expect to see further improvement in that plan through the course of the year.
Speaker Change: Thanks, Jeff.
Benoit Poirier: Okay, and my second question, when we look at free cash flow, a nice beat in the quarter, so better than typical seasonality. So could you walk us through the cadence of free cash flow generation and the big moving parts of going forward the rest of the year? And in terms of leverage, you were also down to 1.6 times, so a great achievement quarter over quarter. So I'm just curious to know what are the next steps with respect to regain the investment grade as there's typically a lie? Thank you.
Speaker Change: And my second question when we look at free cash flow you a nice beat in the quarter, so better than the typical seasonality. So could you walk us through the cadence of free cash flow generation and the big moving parts are going to be a reminder of the year.
Speaker Change: And in terms of leverage you you were also down to one six times, so great achievement quarter over quarter. So I'm just curious to know what are the next steps with respect to regain investment grade is there typically a like thank you.
Jeffrey Allan Bell: Yeah, sure. I want to take the last one first, to begin with.
Speaker Change: Yes, sure wanted to take the last one first to begin with.
Jeffrey Allan Bell: You know, Benoit, you will have seen, as others will have, that we were pleased not only where we were in terms of our leverage ratios at the end of 2023, but that obviously continued in the first quarter of 2024. And, you know, we were pleased to see both S&P and DBRS move us to positive outlooks, so double B plus with a positive outlook. So, you know, I very much feel like we're making the progress we expected towards, you know, ultimately achieving those investment grade credit ratings. Obviously, that's up to the rating agencies themselves in terms of when we get there.
Speaker Change: Then why are you you will have seen us as others will have pleased not only where we were at in terms of our leverage ratios at the end of 2023, but obviously that continued in the first quarter of 2024.
Speaker Change: And we were we were pleased to see both S&P and D. B R. S move us to positive outlooks are double b plus with a positive outlook so very.
Speaker Change: Very much feel like we're making the progress we expected towards ultimately achieving those investment grade credit ratings, obviously, that's up to the rating agencies themselves in terms of when ultimately we get there, but we feel like we're on a good trajectory, there and certainly our financial metrics and our business risk.
Jeffrey Allan Bell: But, you know, we feel like we're on a good trajectory there. And certainly, our financial metrics, you know, and our business risk, we think are now very much in that investment grade range. So I think we're making good progress there. In terms of the cadence of cash flow, you're right, it's great to see in the first quarter, a real improvement year on year. That was very much, you know, in our expectations and forecast.
Speaker Change: We think it is now very much in that investment grade range. So I think we're making good good progress there.
Speaker Change: In terms of the cadence of cash flow, you're right great to see in the first quarter.
Speaker Change: Real improvement year on year that was very much in our expectations and forecast.
Jeffrey Allan Bell: And it's very much, you know, part of what underpins our guidance and outlook for this year to make a material step forward in terms of our operating cash flow generation. So that guidance of over $400 million, you know, compared to where we've been in previous years. I would say, however, and as we said in Q4, that cash flow generation will ultimately be as it has been in many previous years, weighted to the second half of the year. So, you know, we expect to see improvement here year on year in the first half. But the weighting of the overall cash flow for the year is likely to be in the second half.
Speaker Change: And it's very much part of what underpins our guidance and outlook for this year to make a material step forward in terms of our operating cash flow generation, so that guidance of over $400 million.
Speaker Change: Compared to where we've been in previous years I would say however.
Speaker Change: And as we said in Q4 that that.
Speaker Change: Cash flow generation will ultimately be as it has been in many previous years weighted to the second half of the year. So.
Speaker Change: We expect to see improvement here year on year in the first half.
Speaker Change: But the.
Speaker Change: The weighting of the overall cash flow for the year to be in the second half.
Benoit Poirier: Okay, thank you very much for the time. I'm looking forward to seeing you on June 13th. Thank you.
Speaker Change: Okay. Thank you very much for the time and are looking forward to seeing you on June 13.
Speaker Change: You bet.
Jacob Jonathan Bout: The next question comes from Jacob Bout with CIBC; please go ahead.
Speaker Change: The next question comes from Jacob bout with CIBC. Please go ahead.
Speaker Change: Good morning.
Speaker Change:
Jacob Jonathan Bout: Another question on... 2024 targets. You took up your organic revenue growth guidance for nuclear power from 15 to 20%. What are you seeing today versus in March when you released your guidance for the year? And specifically, what projects are driving this improved outlook?
Speaker Change: Another question on <unk>.
Speaker Change: 2024 targets.
You took up your organic revenue growth guidance from nuclear.
Speaker Change: 20% what are you seeing today versus in March when we released our guidance for the year.
Speaker Change: What projects are driving this improved outlook.
Ian L. Edwards: And particularly in the nuclear field, yes, yeah, yeah, yeah, yeah, I mean, so. Look, we could talk a lot about nuclear energy. There's so much to say.
Speaker Change: Particularly in nuclear.
Speaker Change: Yes, yeah, yeah, yeah, Yeah, I mean so.
Ian L. Edwards: So let me take a general kind of overview of where we see nuclear energy and then come back to the point about this year. And obviously, if there are follow-up questions from you or anybody else, we can go into it a bit longer. There's so much strong demand emerging for new nuclear and nuclear power generation. Clearly, owning the sole rights to the CanDo technology, the Canadian technology, is a very differentiated privileged position that we have.
Speaker Change: Well listen.
Speaker Change: I mean, if we could talk a lot about nuclear there's so much to say so let me take a general kind of overview of where we see nuclear and then come back to the points about this year.
Speaker Change: And obviously, if there's follow up questions from you or anybody else. We can we can dive in a bit longer.
Speaker Change: There's so much.
Speaker Change: Strong demand emerging for new nuclear and nuclear power generation.
Speaker Change: And.
Speaker Change: Clearly.
Speaker Change: Owning the sole rights to the can do technology the Canadian technology.
Speaker Change: It's a very differentiated privileged position that we have.
Ian L. Edwards: Incidentally, we're also seeing very strong demand for waste management, and we're also seeing strong demand for the services business that supports other nuclear technologies, such as the EDF support that we give in the UK and the support we give to GE Hitachi here for the SMR in Canada. I mean, the backlog is up 87%, so forward-looking kind of metrics here on the backlog are very significantly up.
Speaker Change: Incidentally, we're also seeing very strong demand for waste management and we're also seeing strong demand for the services business that supports other nuclear technologies, such as the Etfs support that we give in the UK.
Speaker Change: And the support we give to GE Hitachi here for the SMA and.
Speaker Change: In Canada.
Speaker Change: I mean backlog is up 87%. So forward looking kind of metrics here our backlog is very significantly.
Speaker Change: Oh.
Ian L. Edwards: And obviously, the nuclear renaissance has been driven by the need for secure, affordable, reliable, and clean energy. CanDo is actually only one of six technologies in the world that are currently licensed for large nuclear technologies. So there are very few players right now, today, that can actually offer new nuclear technologies.
Speaker Change: Obviously, the nuclear Renaissance is being driven by the need for secure.
Speaker Change: Portable reliable and clean energy.
Speaker Change: Can do is actually only one of six technologies in the world that are currently licensed large nuclear technologies.
Speaker Change: So there are very few players right now today that can actually offer new nuclear.
Speaker Change: The show to demand for can do is actually being driven by the reshaping of the rebuilding of reactors such as the work that we've done and Bruce and Darlington as you've seen the announcements and patron.
Ian L. Edwards: The short-term demand for CanDo is actually being driven by the re-tubing or the rebuilding of reactors, such as the work that we've done in Bruce and Darlington. And as you've seen the announcements in Pickering here in Canada, and you've also seen that we are re-tubing in Seneboda. But that's not the end of the story.
Speaker Change: Canada and you've also seen that we reshape incentive OTA, but that's not the end of the story.
Ian L. Edwards: That there are projects that we are discussing for CANDU reactors around the world to retube. And that's where getting a real fix on the outlook going forward is somewhat difficult because we are negotiating for new contracts, and they're binary as to when they happen. We're confident they will happen, but we need to actually secure them and get them across the line. And a lot of these are complex, through government funding and the like.
Speaker Change: There are projects that we are discussing four can do reactors around the world to recoup them.
And that's where I get.
Speaker Change: Getting a real fix on the outlook going forward.
Speaker Change: This is somewhat a bit difficult because we are negotiating for new contracts in that binary.
Speaker Change: As to when they happen, we're confident they will happen, but we need to actually secure them and get them across the line and I know a lot of these are complex through government funding and under like so very very positive.
Ian L. Edwards: So, very, very positive. I mean, we're absolutely confident of the guidance that we've increased because that's what we've already secured that we know we will execute in 2024. And we could see if we secure more contracts from an upside to that. And in addition to that, we are.
Speaker Change: We're absolutely confident that's the guidance that we have increased because that's where we've already secured that we know we will execute in 2024.
Speaker Change: And we could see if.
Speaker Change: If we secure more contracts some upside to that.
Speaker Change: And in addition to that we are.
Speaker Change: Looking at the.
Speaker Change: The Newbuild first set of over three and four which the Canadian government is supported.
Speaker Change: And again, we're in heavy negotiation to get that across the line. If we do get that across the line. This year there'll be some revenues coming into this year, but it's really quite binary on those awards, but what what you know what a great market.
Speaker Change: And this is all turned around in the last couple of years.
Speaker Change: So.
Ian L. Edwards: Going forward, you know, if you're to characterize the growth and in kind of the three subsectors, you call out, you know, the new bills versus reactor support versus waste management. Obviously, new builds are going to be lumpy, but you know, if you look at it over the long term, do you expect similar growth across those three individual areas, or how would you characterize that? Oh, I mean, I think the Waste Management Bid...
Speaker Change: Going forward, if you could characterize the growth in kind of the three sub sectors you call out the new builds versus reactive support versus waste management.
Speaker Change: Obviously, new built and it's going to be lumpy, but.
Speaker Change: You look at over the long term you expect similar growth across those three individual areas or how would you characterize that.
Ian L. Edwards: I think the waste management business is likely to continue at the same level of activity that we've got now, but they can do both. They can do reactor retubing, life extension work is on the increase, and the potential for new builds, both the existing technology that we have in CANDU, which would be deployed at C3, C4, but more importantly, the Monarch technology that we're investing in, in the medium to long term, is very significant.
Speaker Change: Oh, I mean, I think the waste management business is likely to continue at the same level of activity that we've got now.
Speaker Change: But they can do.
Speaker Change: Both we can do.
Speaker Change:
Speaker Change: Reactive recoupment.
Speaker Change: But life extension work.
Speaker Change: This is an increase.
Speaker Change: And the potential for Newbuild, both the existing technologies that we have been can do which will be deployed <unk> four but more importantly, the monarch technology that we're investing in in the medium to long term.
Speaker Change: Very significant.
Speaker Change: Okay.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Christopher Allan Murray: The next question comes from Chris Murray with ATB Capital Markets. Please go ahead.
Speaker Change: The next question comes from Chris Murray with Keybanc capital markets. Please go ahead.
Ian L. Edwards: Can you talk a little bit about the sustainability of those growth rates and how we should be thinking about the business as it seems to be rebasing a little bit?
Christopher Allan Murray: Yeah. Thanks, good morning.
Speaker Change: Well, maybe just talk about the EMEA.
Speaker Change: Group, a little bit the segment.
Speaker Change: Very very strong growth.
Speaker Change: Gross revenue up around 58% net revenue up about 47 can you talk a little bit about the.
Speaker Change: Sustainability of those growth rates.
Speaker Change: And how we should be thinking about the business as it seems to be making a little bit.
Ian L. Edwards: Yeah, for sure. For sure.
Speaker Change: Yeah for sure for sure.
Ian L. Edwards: I mean, and... We have clearly in the new organizational structure created the Asia, Middle East, and Australia business with Christine Healy joining us to lead it. And the reason that we've done that is because of the opportunity that we see ahead of us in the region. Clearly today, growth has been driven in the Middle East, and it's been driven in the Middle East through the City Development and Property Development work that's been undertaken primarily in Saudi Arabia, and you saw the kind of growth that we're getting out of that. It's close to 60% year over year, and that's good.
Speaker Change: We have clearly in the new organization structure created.
Speaker Change: The Asia Middle East and Australia business with Christine Healy, joining us to lead it.
Speaker Change: And the reason that we've done that is because of the opportunity that we see ahead of us in the region.
Speaker Change: Clearly today the growth is being driven.
Speaker Change: Middle East and it's been driven in the middle East through the city development.
Christine Healy: In property development work, that's being undertaken primarily in Saudi Arabia right now when you saw the kind of growth that we're getting out of that it's close to 6% year over year.
Speaker Change: And thats good.
Speaker Change: <unk>.
Ian L. Edwards: What we now want to do is build from that base and diversify the business to grow in other regions where we see significant opportunity. Australia, for example, is, like most countries, pivoting to energy transition work, and that would be... Transmission and distribution work; that would be pumps, hydro storage, and hydro projects.
Speaker Change: What we now wanted to build from that base and diversify the business to grow and in other regions that we see significant opportunity.
Australia for example is like most countries.
Pivoting to energy transition work.
Speaker Change: And that would be.
Speaker Change: Transmission distribution work that would be cool.
Hydro storage hydro projects and what we see for Atkins realize is our base capability.
Speaker Change: Those end markets are indeed, because the history of Australia. It was more of a transportation the future of US Australia is about energy transition and we have that capability.
Ian L. Edwards: And what we see for Actins Realis is our base capability in those end markets is in need because the history of Australia is more about transportation, the future of Australia is about energy transition, and we have that capability. And we are currently bidding work in Australia and currently Christine is developing a medium and long-range plan that will be presented at Investor Day to show what the potential is for that. In addition... Asia.
Speaker Change: We are currently bidding work in Australia and currently Chris.
Speaker Change: Christine is developing.
Speaker Change: Medium and long range plan that we'll present at the Investor day to show what the potential is for that.
Speaker Change: In addition.
Ian L. Edwards: I mean, our Asia business has been primarily around industrials and has a bit of a, you know, a really long history in Hong Kong. Now, Hong Kong, I was there a few weeks ago, we're seeing a real reinvestment into infrastructure and new city development where we can bring our business back and grow it to meet that demand, as well as expand our industrial business across Asia. So, it really is the kind of next evolution of our growth plan.
Speaker Change: Asia.
Speaker Change: Our Asia business has been primarily around industrials.
Speaker Change: And a bit of a.
Speaker Change: Really long history in Hong Kong Hong.
Speaker Change: Hong Kong I was there a few weeks ago, we've seen a real reinvestment into infrastructure and a new city development, where we can bring our business back and grow that to meet that demand as well as expand our industrials business across Asia. So it really is the kind of next.
Speaker Change: <unk> of our growth plan.
Speaker Change: We have stabilized our business across what we used to call our core regions of U S, Canada and the U K, we've now crystallized our regional business platform through the new structure, which we will present, obviously at the Investor day and in EMEA is an important part of that growth plan.
Ian L. Edwards: You know, as we've stabilised our business across what we used to call our core regions of the US, Canada, and the UK, we've now crystallized a regional business platform through the new structure, which we will present, obviously, at Investor Day, and EMEA is an important part of that growth plan.
Christopher Allan Murray: Thank you. Thank you. Yeah, no, that's great.
Speaker Change: Thank you.
Christopher Allan Murray: My second question is maybe a couple of cleanups in the quarter. I'm not sure who wants to take this. Jeff, maybe I'll start with you.
Speaker Change: Yes, no that's great.
Speaker Change: My second question, maybe is maybe a couple of clean up on the quarter.
Jeffrey Allan Bell: On the corporate cost, the revision, how much of the corporate cost in the quarter and how much of the revision is tied to stock-based comp, and is there an actual figure you could let us know about? And then kind of the second part of this question is just around the capital business. What was the magnitude of the revaluation, and what type of asset was it that was revalued?
Speaker Change: I'm not sure who wants to take this Jeff maybe I'll start with you on the on the corporate costs the revision.
Speaker Change: How much of the corporate costs in the quarter and how much of the revision is tied to stock based comp and is there an actual figure you could let us know about and then kind of the second part of this question is just around the capital business what was the magnitude of the revaluation and what type of asset wasn't that.
Speaker Change: Ah was revalued.
Jeffrey Allan Bell: Yeah, sure. So what I'd say with respect to the first question, Um... Chris, the increase was primarily related to the stock-based compensation, so you remember that typically we're about $25 million a quarter. We said there'd be a little bit extra for final branding and related costs, so that would take us from $25 million, we said the first half might be closer to $30 million, and then in reality the additional costs around all that was primarily related to the long-term compensation element, so then in the first quarter we may see a bit of that in the second quarter, but then we'll revert back to that more sort of mid-20s normalized cost as we get later in the year.
Speaker Change: Yeah sure so what I would say with respect to the first question.
Speaker Change: Chris.
Speaker Change: The increase was primarily related to the stock based compensation. So you remember that typically we're about $25 million a quarter, we said there'd be a little bit extra for.
Speaker Change: Final branding and related costs, so that would take us from 25, we said clearly in the first half might be closer to 30.
Speaker Change: And then in reality the additional costs are.
Speaker Change: Around all of that was primarily related to the to the long term compensation elements. So so that in the first quarter, we may see a bit of that in the second quarter, but then we will revert back to.
Speaker Change: Back to that more sort of mid twenty's normalized cost as we get later in the year.
Jeffrey Allan Bell: Then I think on your second question, in terms of the financial asset, it was a write-down of around $10 million; it was at one time a non-cash write-off of part of the financial asset within a small investment that we had, so nothing material, it happens within the portfolio from time to time, frankly, one way or the other.
Speaker Change: Then I think on your second question in terms of in terms of the financial asset. It was it was a write down of around $10 million. It was a one time non cash write off of a part of the financial asset within a small investment that we have so.
Speaker Change: No nothing nothing.
Speaker Change: Material.
Speaker Change: It happens within that portfolio from time to time, frankly, one way or the other.
Christopher Allan Murray: Okay, I'll leave it there. Thanks, folks. Thank you.
Speaker Change: Okay I'll leave it there thanks Bob.
Speaker Change: Yes.
Speaker Change: [noise].
Michael Doumet: The next question comes from Michael Doumet with Scotiabank. Please go ahead.
Speaker Change: The next question comes from Michael <unk> with Scotiabank. Please go ahead.
Michael Doumet: Hi, good morning, guys. So on the engineering services, you know, obviously, everybody's talking about strong growth there. It does look like the direct costs for subcontracting doubled this quarter versus the trend last year. So just thinking, as we think about organic growth through the balance of the year and subcontracting, is there a variation in the trend that we should expect through the balance of the year or maybe something similar to what we saw in Q1?
Speaker Change: Hey, good morning, guys.
Michael: So on the engineering services, obviously everybody's talked about strong growth there.
Speaker Change: It does look like the direct cost for sub contracting doubled this quarter versus the trend last year.
Speaker Change: So just thinking as we think about organic growth through the balance of the year and the sub contract is there a variation in the trend you should expect through the balance of the year, maybe something similar to what we saw in Q1.
Jeffrey Allan Bell: Yes, it's Jeff. Why don't I take that? I'm not sure I quite recognize the doubling of the subcontract cost. I mean, broadly, we think our sort of net revenue to gross revenue model is fairly consistent sort of year over year. And we would expect that to continue throughout the year. Effectively, the operating margin improvement that we're seeing is underlying.
Jeffrey Allan Bell: Yes, it's Jeff why don't I take that I'm not sure I quite recognize doubling of the subcontract costs. I mean broadly we think are sort of net revenue gross revenue.
Jeffrey Allan Bell: Model it was fairly consistent sort of year over year, So and we would expect that to continue throughout the year effectively.
Jeffrey Allan Bell: The operating margin improvement that we're seeing is from underlying EBIT and EBITDA improvement.
Michael Doumet: No, sorry, Jeff, maybe I mischaracterized it, not doubling, but certainly an increase here and there. So just, yeah, I think your answer there is certainly Yes. I mean, it really moves you around.
Speaker Change: No I'm sorry, Jeff.
Speaker Change: Mis characterize it not doubling but certainly an increase year on year. So just yeah.
Speaker Change: Yeah, I think your answer there certainly.
Speaker Change: Yes, I mean, that's the question.
Jeffrey Allan Bell: Yeah, a little bit quarter by quarter, but I don't think we'd see that outside the sort of normal range that it operates in.
Speaker Change: Yeah, a little bit quarter by quarter, but I don't think we'd see that outside the sort of normal range that it operates in.
Michael Doumet: Perfect. Okay, helpful.
Speaker Change: Perfect Okay.
Speaker Change: And then maybe move into nuclear now I'm, assuming you know much of the incremental growth in nuclear.
Speaker Change: In the <unk>.
Speaker Change #100: Revised guidance will come from.
Speaker Change #100: Increasing organic hires.
Speaker Change #101: Even the margin guide there was not right is that the right interpretation and if you do you envision that I mean any challenges there.
Speaker Change #102: As it relates to recruiting to satisfy the demand growth.
Michael Doumet: And then maybe moving to nuclear now, I'm assuming, you know, much of the incremental growth in nuclear in the revised guidance will come from, you know, an increase in organic hires, given the margin guide there was not raised. Is that the right interpretation? And if you do envision that, are there any challenges there? Is it as it relates to recruiting to satisfy the demand growth.
Speaker Change #101: Yeah.
Speaker Change #103: Really good question I mean talent is key to the growth of the whole company in a nuclear particularly.
Ian L. Edwards: Yeah, that's a really good question. I mean, talent is key to the growth of the whole company, and Nuclear, in particular. And finally, a very important point, and a key point, is key to the demand that we have, both in the projects that we're winning, and the services that we apply to other technologies other than our own technology can do, but also in the development of the monarch. We're deploying resources to the development of the monarch to be ready for the deployment of the gigawatt monarch as well. So the way we're going about this is really in three ways.
Speaker Change #103: It is key to the demand that.
Speaker Change #103: But we have both in the projects.
Speaker Change #103: That we're winning and the services that we apply to other technologies other than our own technology can do but also in the development of the monarch.
Speaker Change #103: Deploying resources to the development of the mono to be ready.
Speaker Change #103: For deployment of the gigawatt mono as well so the way we've gone about this is really.
Ian L. Edwards: We're clearly out there looking for nuclear talent, and I think it is because of the employee experience that we provide. We are able to lower our attrition rates and increase our recruitment rates. So that's clearly something that we're very active in, and we are doing. We're also, um... Retraining and deploying a general engineering capability into nuclear energy. And you can imagine that if you take a, like a, say a life extension project. There is the nucleus of people that need to be nuclear, but there is also a lot of general engineering where we can deploy that from the 38,000 employees we've got around the world, and we're doing that also.
Speaker Change #103: In three ways, we clearly out there looking for nuclear talent.
Speaker Change #103: I think because of the employee experience that we provide.
Speaker Change #103: We are able to lower our attrition rates and increase our recruitment rate. So that's clearly something that we're very active and we are doing.
Speaker Change #103: We're also.
Speaker Change #103: Retraining.
Speaker Change #103: And deploying our general engineering capability into nuclear.
Speaker Change #103: And you can imagine that if you take like say it say a life extension project.
There is a nucleus of people that need to be nuclear but there was also a lot of general engineering, where we can deploy that from the 38000 employees. We've got around the world and we're doing that also.
Ian L. Edwards: And the last expansion of capacity is more use of our global technology center in India. I mean, traditionally, the use for supporting our customers in the UK has been very strong from the GTC, and we're now improving our support in Canada to meet the demands in Canada. So we have a plan, and the plan is working in order to deploy the resources, but not without challenge. I absolutely recognize that.
Speaker Change #104: And the last.
Speaker Change #104: The expansion of capacity is more use of our global technology.
Speaker Change #104: In India.
Speaker Change #105: Traditionally that they use for supporting our customers in the U K has been very strong.
Speaker Change #105: From the GCC and when now improve our support in Canada to meet the demands in Canada. So so we have a plan.
Speaker Change #105: And the plan is working in order to deploy the resources, but.
Speaker Change #105: Not without challenge I, absolutely recognize that.
Speaker Change #106: Perfect. Thanks, very much guys.
Speaker Change #107: Thank you.
Speaker Change #107: Yes.
Michael Tupholme: The next question comes from Michael Tupholme with T.D. Cowan. Please go ahead.
Speaker Change #108: The next question comes from Michael to flow with TD Cowen. Please go ahead.
Speaker Change #109: Thank you good morning.
Speaker Change #110: One of them.
Michael Tupholme: I wanted to ask you about the backlog, Atkins Rail Services' backlog, obviously a very significant quarter-over-quarter increase, so sort of two parts to the question. One, can you talk about the operations and maintenance contract, which drove a lot of that increase? And then, secondly, if we look beyond that portion of the increase, as far as the rest of Atkins Rail Services, I think you said that some of the growth you saw primarily came from the U.S. and the U.K., but I'm wondering if you could elaborate a little bit on the end markets that are really driving the growth.
Speaker Change #111: Wanted to ask you about the backlog Atkins rail services backlog, obviously, a very significant quarter over quarter.
Speaker Change #112: Increase so sort of two parts to the question. One can you talk about the operations and maintenance contract, which drove a lot of that increase.
Speaker Change #112: And then secondly, if we look.
Speaker Change #112: Beyond beyond that in that portion of the increase as far as the rest of Atkins rail services.
Speaker Change #113: I think you said that some of the growth you saw primarily came from the U S and the UK, but wondering if you can elaborate a little bit on the end markets that are really driving the growth there.
Jeffrey Allan Bell: Jeff, why don't you answer the first question, and I'll call him to the mic. Yeah. So, no, you're absolutely right. We did see a big one-time increase because of that Shum contract, so it's about $1.4 billion. But, you know, having put that in, the underlying businesses themselves, which Ian will talk a bit more about, you know, we saw, you know, good further backlog growth, particularly in the U.S. and the U.K., but I would say that, you know, Canada, while having a smaller increase quarter-on-quarter, is up significantly in the non-operations and maintenance and engineering design consultancy.
Jeffrey Allan Bell: Jeff Why don't you answer the first question on our I'll call them put them out yeah, yeah. So no you're absolutely right. So we didn't see a big one time increase because of that some contracts. So it's about $1 4 billion.
Jeffrey Allan Bell: But having having put that in the underlying businesses themselves with gene I'll talk a bit more about.
Speaker Change #114: We saw good further backlog growth, particularly in the U S and the U K, but I would say that Canada, while having a smaller increase quarter on quarter is up significantly.
Speaker Change #115: In the non operations and maintenance and engineering.
Speaker Change #115: Part design consultancy et cetera significantly year over year. So so we're really pleased we're really pleased with that and Thats a big part of what was driving the additional revenue and operating profit as you heard earlier in the quarter, but even if you I don't know for sure.
Ian L. Edwards: A big part of what was driving the additional revenue and operating profit, as you heard earlier and in the quarter, but Ian, if you had a question about that in the market, yeah, sure.
Ian L. Edwards: I mean, just to kind of get a bit more granular, now that we're on this regional, maybe we've already touched on Canada and EMEA, I think, and UK and Ireland are interesting for us because the backlog has increased 11%. We've still got growth out of the UK of 5% year over year. And it's because we're actually very strong in the transport sector. And whilst I think the capex in the transport sector in the UK has come off a bit, obviously, the railways and the roads have got to stay open, and we do a lot of framework agreements on OPEC. And we've actually won even more signaling framework agreements in recent times.
Speaker Change #116: Just to kind of get a bit more granular.
Speaker Change #117: Now we're on this regional maybe we've already touched on Canada, and EMEA or ethane, Ken you can add in.
Speaker Change #118: Interest and froze.
Speaker Change #118: Because the backlog has increased 11%.
Speaker Change #119: We still got growth out of the U K.
Speaker Change #119: A 5% year over year.
Speaker Change #120: And it's because we are actually very strong in the transport sector.
Speaker Change #121: Well I think the capex in the transport sector in the U K has come off a bit obviously, the railways and roads that go to stay open and we do a lot of framework agreements on Opex.
Speaker Change #121: We are actually going to eat more.
Speaker Change #121: Lean framework agreements.
Speaker Change #121: In the in the recent times. So so we're able to keep up [noise] transport sector really high, but where we're seeing new opportunity.
Ian L. Edwards: So we're able to keep our transport sector really high, but where we're seeing new opportunities in the UK for defense and water and Energy Transition work, and we're actually being able to pivot quite well into getting our share, particularly in water and defense. So we're still seeing a buoyant market for us, and something that we're still excited about. I mean, I was there very recently on a tour and even went to Ireland, where there's quite a significant investment in the rail structure across Northern and Southern Ireland, which we've won some work on, which you will have seen. The US and particularly, our land and expand strategy. We'll talk more about this at investor day. It is working.
Speaker Change #121: The UK is defense and water.
Speaker Change #122: Energy transition work, and we were actually being able to pivot quite well into getting a share, particularly water and.
Speaker Change #122: Defence, So we're still seeing a buoyant market for us and something that the.
Speaker Change #123: We're still excited about it I mean was that very recently on a tour and even went to Ireland, where there's quite a significant investment in the rail structure across northern and Southern Island, which we've won some work home.
Speaker Change #123: You will have seen.
Speaker Change #123: U S.
Speaker Change #123: And then particularly.
Speaker Change #123: Our land and expand strategy, we'll talk more about this at the Investor Day is working I mean, we've grown over 30%.
Ian L. Edwards: I mean, we've grown over 30% year over year and backlogs are up 9%. A lot driven by all the investment funding, IAGA, CHIPS, and IRA, but it's essential because you've got aging infrastructure, you've got the need for energy, and obviously there's an election coming, but we don't see that this buoyant market is going to change significantly. So our land and expanse strategy is giving us some good growth there. So a bit of a long answer, but there is a lot going on.
Speaker Change #123: Year over year end backlog was up 9%.
Speaker Change #123: A lot driven by all the investment funding Iga chips, and I alright, but it is essential because you've got aging infrastructure and the need for energy.
Speaker Change #123: And then obviously, there's an election coming but we don't see that this point market is going to change significantly so our land and expand strategy has given us some.
So some good growth there so instead of a long answer, but a lot going on.
Michael Tupholme: No, that's helpful. Thank you. And then the second question is just any update on the links for sales.
Speaker Change #123: No. That's helpful. Thank you and then the second question is just any update on the links on sale.
Ian L. Edwards: Yeah, I mean, you know, it's our intention to exit this business. We are focused right now on improving the performance of the business. You'll see the backlog, so you'll see a return to some profit. We're aligned with our partners to find the right buyer. Frankly speaking, I think it's going to take a while to find the right partner. We've got to show performance in the business. It's a global business, so we've got to find a new partner and buyer for Hitachi that is willing to take that global business on. We're in the process. We're working with our partner on it. There's nothing that we can announce in the short term, but we'll get there. The intention is to completely exit.
Speaker Change #124: Yeah I mean.
It's our intention to exit this business.
Speaker Change #124: We are focused.
Now.
On improving the performance of the business Youll see the backlog so you'll see some profit.
Speaker Change #124: We're aligned with our partner.
To find the right buyer Frank.
Frank: Frankly speaking I think it's going to take a while to find the right partner we've.
Frank: Got it shook out performance in the business.
Frank: Global business. So we've got to find a partner, our new partner and buy it.
Speaker Change #126: For it's actually the he's willing to take that global business Tom.
Speaker Change #126: So we're into a process, where we're working with our partner on that.
Speaker Change #126: There's nothing there.
Speaker Change #126: We can announce in the in the in the short term, but we will get there I mean and the intention is to absolutely exit.
Speaker Change #126: Yes.
Michael Tupholme: Perfect. I will leave it there. Thank you.
Speaker Change #127: Perfect I'll leave it there thank you.
Speaker Change #127: Thank you.
Maxim Sytchev: The next question comes from Maxim Sytchev with National Bank Financial.
Speaker Change #128: The next question comes from Maxim <unk> with National Bank Financial. Please go ahead.
Maxim Sytchev: Hi, good morning, gentlemen. Ian, maybe the first question for you, I mean, I mean, you've been generating kind of double the growth of industry peers in engineering over the last, let's call it, 18 months. And I mean, obviously, everybody can see the numbers, but is there a greater focus on the fact that you don't have to spend kind of like all your time and resources on an LSDK, increasing the amount of marketing dollars? I mean, like, what's actually driving that? [inaudible]
Maxim Sytchev: Hi, good morning, gentlemen.
Speaker Change #130: Good morning.
Speaker Change #131: Maybe first question for you I mean, you've been generating kind of a double the growth of.
Speaker Change #131: Industry peers are in engineering over the last let's call it 18 months.
Speaker Change #131: I mean, obviously everybody can see the numbers, but is it greater focus on the fact that you don't have to spend kind of like all your time on what sorts of my knowledge teekay, increasing kind of marketing dollars I mean, like what's actually driving that performance.
Speaker Change #131: Yes.
Speaker Change #131: Okay.
Speaker Change #131: So.
Ian L. Edwards: I know what we do, and I'll talk about what we do. And we were very deliberate when we announced our pivoting to growth strategy for the previous outlook period, 22 to 24. We set out to really build an organic growth machine, and we really took two areas that we looked at strongly. One is We've built an organization that is very connected. We, you know, haven't done a lot of M&A that we've needed to integrate over the last few years.
Speaker Change #132: And I know, what we do and I'll talk to what we do.
Speaker Change #132: And we've been very deliberate.
Speaker Change #132: When we announced our pivoting to growth.
Speaker Change #132: Strategy for the previous outlook period.
Speaker Change #132: 2024.
Speaker Change #132: We set up set about really building.
Speaker Change #132: Building, an organic growth machine and.
Speaker Change #132: We really took two.
Speaker Change #133: There is a.
Speaker Change #134: We looked at strongly.
Speaker Change #134: One is.
Speaker Change #134: We've built an organization.
Speaker Change #134: That is very connected.
Speaker Change #134: We you know we haven't done a lot of M&A that we've needed to integrate over the last few years. So we're focused on building this globally.
Ian L. Edwards: So we've focused on building this globally connected organization where, through end-market capability, and through geographical capability, and also the way we sell services, whether it's design or whether it's consulting or whether it's project management, we've connected it all horizontally. And the final piece of this was when we created the Chief Operating Officer's Office with the regional structure, which kind of drives that home. So working on key account management, and working on work-winning processes. [inaudible] I think the second thing is...
Speaker Change #134: Connected organization, where through end market capability.
Speaker Change #134: And through geographical capability at all.
Speaker Change #134: So the way we saw services, whether it's design on whether it's consulting or whether it's project management with connected at all horizontally.
Speaker Change #134: And the final piece of it.
Speaker Change #134: It was when we created the chief operating officer's office with the regional structure, which kind of drives that home so working on.
Speaker Change #134: Key account management work and our work went and processes.
Speaker Change #134: Offering this end to end capability that we've got I mean, I've just been on a world tour met lots of customers what they like about Atkins reality is the ability not just to do some design the ability to do that design, but then recommend how is it going to construct it and recommend how they're going to deliver it and even recommend how the asset is operate.
Speaker Change #134: So that the end through this end to end services offering.
Speaker Change #135: The second thing is.
Ian L. Edwards: The way we've positioned the company has been really deliberate in terms of geography and end markets. And when we spoke about this on our last Investor Day, we were deliberate in saying we're focusing on Canada, the US, and the UK. And that we're going to drive our end markets that we're good at, nuclear and transport. And we've evolved that strategy now to this four-region strong nuclear business, but with a focus on where end markets are going.
Speaker Change #135: The way we've positioned the company has been really deliberate in terms of geography and end markets.
Speaker Change #135: When we set about this.
Speaker Change #135: On our last Investor day.
Speaker Change #135: We were deliberate in saying, we're focusing on kind of the U S and U K and that that we're going to drive our end markets that were good nuclear in transport and.
Speaker Change #135: Evolve that strategy now to this full region strong nuclear but our focus on where end markets go I mean.
Ian L. Edwards: I mean, a lot of energy transition work, a lot of defense work, a lot of water work now that we're seeing. And we've pivoted our capability towards those end markets. So, you know, we're clearly pleased with this work within the machine that we've built, and we will continue to focus on it and share a lot more of it at the invested edge.
Speaker Change #135: A lot of energy transition work a lot of defense work a lot of water work now that we're seeing and we've pivoted our capability towards those end market. So we're clearly pleased with this work when your machine that we've built.
Speaker Change #135: And we will continue to focus on that and share a lot more of it at the Investor day.
Maxim Sytchev: Thanks a lot. Thanks so much.
Speaker Change #136: Yeah, that's a lot of sense. Thanks, so much and one quick question for Jeff If I may.
Jeffrey Allan Bell: And one quick question for Jeff, if I may. Do you know right now if the credit rating agencies are applying an enhancer to the 4-7 ownership? Or do you think right now, given the leveraging, some of the balance sheet stands on its own?
Speaker Change #137: Do you know right now the credit rating agencies is there an enhancer apply to the four seven.
Speaker Change #138: Ownership or do you think right now.
Speaker Change #139: Given the deleveraging the balance sheet stands on its own.
Jeffrey Allan Bell: Yeah, so, I'm trying to remember exactly. Definitely, in some of their models, they give us an enhancer for the 407, but I think what we're focused on, Max, is very much having a business that, with or without the 407, is investment grade from a business risk perspective as well as a financial metrics perspective. So, in a sense, regardless of whether we hold it, the business itself would be investment grade-worthy, so to speak. So, I think that's the path that we're on with that. Oh, okay.
Speaker Change #139: Yes.
Speaker Change #140: So I'm.
Speaker Change #141: I'm trying to remember exactly definitely in some of their models they give us an enhancer for the $4 seven.
Max: But I think what we're focused on Max is very much having a business that with or without the 407.
Max: Investment grade from a business and business risk perspective, as well as a financial metrics perspective, so in a sense, regardless of whether we hold it.
Max: The business itself would be investment grade worthy so to speak so I think that's it.
Max: Path that we're on with that.
Maxim Sytchev: Okay, that makes a lot of sense. Thanks so much, Oman.
Speaker Change #143: Oh, okay, Okay that makes a lot of sense. Thanks, so much Alan.
Yes.
Denis Jasmin: This concludes the question and answer session. I would like to turn the conference back over to Denis Jasmin for any closing remarks.
Speaker Change #144: This concludes the question and answer session I would like to turn the conference back over to Dennis Jasmine for any closing remarks.
Denis Jasmin: Thank you very much, everyone, for attending this call, and if you have more questions, please don't hesitate to contact me directly. Thank you very much, and have a good day, everyone. Bye bye. This concludes today's conference call. You may disconnect.
Denis Jasmin: Thank you very much everyone for attending this call. If you have more questions. Please don't hesitate to contact me directly. Thank you very much not the good day, everyone Bye bye.
Operator: This concludes today's conference call. You may disconnect your line. Thank you for participating and have a pleasant day.
Speaker Change #145: This concludes today's conference call you may disconnect your lines.
Speaker Change #145: Thank you for participating and have a pleasant day.
Speaker Change #145: Yeah.
Speaker Change #145: [music].
Yeah.
Speaker Change #145: Yeah.
Speaker Change #145: [music].
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Speaker Change #145: Yeah.
Speaker Change #145: [music].
Speaker Change #145: Hum.
Speaker Change #145: Hum.
Speaker Change #145: [music].
Speaker Change #145: Okay.
Speaker Change #145: [music].