Q2 2025 AtkinsRéalis Group Inc Earnings Call

Speaker #1: Thank ou for standing by and welcome to the Atkinsrealis second quarter 2025 conference call. At this time, all participants are on a listen-only mode.

Speaker #1: After the speaker's presentation, there will be a question and answer session. To ask a estion during the session, you'll ed to press star 11 on your telephone.

Speaker #1: If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, ay's program is being recorded.

Speaker #1: And now, I'd like to, as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Denis Jasmin, Vice President Investor Relations.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you, Jonathan. Bonjour tout le monde. Good morning, everyone. And thank you for joining us today. For those dialing 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.

Speaker #2: Today's call is also webcast. With me today are Ian Edwards, Chief Executive Officer, and Jeffrey 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 and at least seven opportunities participate.

Speaker #2: You are welcome to return to the queue for any follow-up questions. I would ike to draw your attention to slide two. Comments made on today's call may contain forward-looking information.

Speaker #2: 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 #2: For further information on these assumptions, risks, and uncertainties, please consult the company's relevant filing on CEDAW Plus. These documents are also available on our website.

Speaker #2: Also, during the call, we may refer to certain non-RFRS financial measures. Reconstruction of these amounts to the corresponding RFRS financial measures are reflected in our earnings release and in DNA, which can be found on CEDAW Plus and our website.

Speaker #2: And now I'll pass the call over to Ian s. Ian?

Speaker #3: Thank you, Denis. Good morning, everyone. And thanks for joining us today. I'm going to begin today's call by providing an overview of our performance in the second quarter.

Speaker #3: Our record backlog and the current success and opportunities we're seeing across our engineering services regions and our nuclear businesses. I'll then pass it to Jeff to provide more detail on our financial results, our 2025 outlook, and our capital allocation activities, we executed in Q2.

Speaker #3: And then we'll open it up for Q&A. So let's get started on slide three. We had another strong quarter with solid revenue growth. Atkinsrealis services revenue grew 15%, to 2.6 billion dollars with strong increases in the engineering services region's nuclear and lintel.

Speaker #3: Engineering services region's revenue organically declined 1% to 1.9 billion dollars while nuclear revenue organically grew 56% to a quarterly record high of 567 million dollars.

Speaker #3: Lintel revenue organically grew 11%. We also had a strong increase in adjusted EPS from PS and PM and adjusted EBITDA from PS and PM, with Atkinsrealis services segment adjusted EBIT increasing 21% to 246 million dollars.

Speaker #3: Our total backlog reached a record high of 21 billion dollars this quarter, as our expertise across engineering services and nuclear continues to be in demand.

Speaker #3: Continued growth and record high backlog in our nuclear business is leading us to increase our revenue outlook for 2025. On the other hand, due to lower year-to-date revenue growth in the USLA and EMEA segments, we are decreasing our 2025 engineering services region's revenue organic growth outlook.

Speaker #3: We expect the full year impact on profitability of all these changes to be neutral. Jeff will provide more details this later in the call.

Speaker #3: During the quarter, we closed on the acquisition of a majority stake in David Evans and completed the sale of our interest in Highway 407.

Speaker #3: This resulted in total proceeds of approximately 2.6 billion dollars. We also paid down our debt by 900 million dollars and repurchased 9 million shares.

Speaker #3: These moves have further strengthened our balance sheet and put us temporarily in the rare position of being net cash positive. We are now distinctly positioned to act on opportunities that arise including further growth through organic and inorganic investments.

Speaker #3: At our investor day in June of last year, we outlined a disciplined capital allocation framework which consisted of maintaining a ong balance sheet, investing in the business, and returning capital to shareholders.

Speaker #3: Since that time, we have taken considered actions across each of these priorities in line with what we said we now have industry and industry-leading balance sheet following the repayment of a significant part of our debt.

Speaker #3: That priority is completed. We also brought back a significant number of shares year-to-date returning approximately 800 million dollars to shareholders. While our MCIB program remains active, going forward, we would expect our share repurchases to be much smaller.

Speaker #3: The remaining capital allocation priority under our delivering excellence and driving growth strategy is investing in the business. We'll our focus going forward as we have said previously.

Speaker #3: We will look to invest to build out the white space of company in our chosen geographies and end markets organically and inorganically. Organically, we will continue to invest in our engineering services regions and our nuclear development.

Speaker #3: As we see very strong future for our nuclear services across the globe, inorganically, our David Evans transaction is a great example of our disciplined approach to executing our lands and expand strategy in the US.

Speaker #3: And we have a strong pipeline of opportunities to continue to do so. In addition, we see opportunities to purchase businesses in our other engineering services regions to address gaps in strategic, high-growth end markets like transport, water, defense, buildings, and power.

Speaker #3: And improve our geographic density. M&A is an area that consumes a meaningful amount of my personal leadership effort. On slide five, you can see the continued progression of our backlog growth across Atkinsrealis services.

Speaker #3: The 33% increase over the prior year was driven primarily by the demand in our nuclear expertise. In Canada, we were awarded a 50 million dollar contract extension for the first of four planned small modular reactor units in Darlington.

Speaker #3: We also have been selected as the technical and project management delivery partner for phase one of the Calgary Green Line. In the UK, our prior successes at London Heathrow Airport have led to additional awards this quarter in support of preventative systems maintenance at their main tunnel.

Speaker #3: And in the US, we are building a leading position supporting transportation development in Florida. This quarter, we were awarded a design and development contract for Florida's 500-mile tunnel network.

Speaker #3: And in Asia, we secured a contract to redesign the design of the Hong Kong section of the Hong Kong Shenzhen Western Rail Link, further expanding our foothold in the growing Asia market.

Speaker #3: Turning to slide six, revenue in our engineering services region's business increased by 6% year over year. Excluding revenues from David Evans and the impact of FX, revenue organically declined slightly.

Speaker #3: This decrease was expected as we faced difficult year-over-year comparisons following a strong performance in Q2 2024. And as we have discussed, we have also experienced delays or termination of a handful of major projects which impacted the first half of the year.

Speaker #3: These projects should roll off in the second half of the year. And excluding these projects, the underlying organic revenue growth in the first half was actually in line with our target of 79%.

Speaker #3: Due to the impact of these projects and lower expected revenue growth in the USLA and EMEA segments, we now expect that revenues for engineering services regions should organically grow in 2025 over 2024 by mid-single-digit percentage.

Speaker #3: Segment-adjusted EBITDA over net revenue margin was nearly 16% for the second quarter, up 50 basis points versus the prior year period. And notably, we continue to increase our backlog, which now stands at 13 billion dollars representing a 6% increase versus our backlog as of June 30.

Speaker #3: 2024. Beginning on slide seven, we provide an overview of each of our four regions and their performance this quarter. In Canada, revenue organically declined 1% but segment-adjusted EBITDA grew to 33 million dollars with a 15% margin.

Speaker #3: As our operating margin improvement efforts delivered a 430 basis point year-on-year increase. Backlog increased 5% year over year and now stands at just below 8 billion dollars.

Speaker #3: A major project in Q2 2024 leading to difficult year-over-year revenue comparison. That said, our relative flat revenue performance coupled with our increased backlog highlights the continued growing demand for our unique end-to-end capabilities across the power of renewables and transportation markets.

Speaker #3: We remain very bullish on our engineering service prospects in Canada as the Building Canada Act is leading to increased opportunities across many markets where we work.

Speaker #3: We're also committed to enhancing margins and the results this quarter highlighted the success of the work in this business. We have successfully implemented initiatives to improve pricing, productivity, and overhead as well as serving our clients more effectively through our global technology center.

Speaker #3: In the UK and Ireland, revenue grew 11% and organically grew 5% year over year. Primarily by strong demand in water, infrastructure markets, and a new investment program in aviation and rail signaling as well as in the defense market.

Speaker #3: Segment-adjusted EBITDA grew 92 million dollars in the quarter representing a 17% EBITDA margin. 40 basis points better than last year. As the business continues to focus on efficient project delivery.

Speaker #3: Backlog grew 13% year-on-year to approximately 1.9 billion dollars driven by winds in water, aviation, and infrastructure. In the UK government, recently announced plans to increase defense spending to 2.5% of GDP by 2027.

Speaker #3: Additionally, the government's 10-year infrastructure strategy commits to over 1.3 trillion dollars in infrastructure investment over the next decade. Spanning our key sectors of water energy, aviation, and rail.

Speaker #3: Turning to slide nine, our US land and expand strategy continues to make strides. We closed on the acquisition of a majority stake of David Evans.

Speaker #3: Achieved a record backlog in Q2. And our prospects pipeline remained strong. During the second quarter, revenue increased by 18% but excluding David Evans acquisition and FX revenues organically declined 3% year over year.

Speaker #3: Strong growth in our US engineering services and transportation infrastructure and industrial markets was offset by a decrease in our global minerals and mining sector.

Speaker #3: Segment-adjusted EBITDA was 52 million dollars and a 13.7% operating margin. An improvement 60 basis points over the previous year. The backlog increased 17% year over year to nearly 1.8 billion dollars as we continue to prioritize client engagement and leverage our unique end-to-end capabilities.

Speaker #3: We continue to build our backlog in the US, winning work with the Department of Transportation and Infrastructure Solutions. Early collaboration with David Evans' team is progressing as planned and has already resulted in winning work together in the US Northwestern.

Speaker #3: As we continue our land and expand strategy, we look to strengthen our foothold in growing end markets and regions across the country. And while uncertainties around tariff negotiations continue, it's important to emphasize that we've not been directly affected by these measures.

Speaker #3: That said, we are closely monitoring potential effects on the broader U.S. economy, and we've seen some delays in infrastructure project wins converting to revenue.

Speaker #3: Regardless of the near-term market uncertainty, our conviction in the long-term growth of our end markets remains strong. We are strategically positioned to capitalize on many opportunities.

Speaker #3: Leveraging our robust balance sheet and increasing cash flow to demand our footprint, expand our footprint, and drive sustained value creation. In EMEA, revenue declined 8% and 9% on an organic basis.

Speaker #3: Segment-adjusted EBITDA declined to 31 million dollars, representing a 16% margin over net revenue. Down just over 3% from a year ago to the business mix of projects.

Speaker #3: Total backlog in EMEA was approximately 1.3 billion dollars, down 4% versus the second quarter for 2024. And declines in revenue and backlog is mainly due to lower volume on buildings and places projects and the completion of a large project in the Middle East at the end of last year.

Speaker #3: Specifically in Saudi Arabia, budget reprioritizations on large-scale programs are taking place. Leading to some award delays and completion of major projects. However, the long-term outlook remains strong.

Speaker #3: And while we are pleased with the current size of our Middle East business, we expect to continue to grow the EMEA region through a disciplined revenue growth strategy in Asia and Australia.

Speaker #3: In Asia, backlog has continued to grow as we are seeing sustained investments in infrastructure and transportation. In Australia, we are focused on expanding our presence through opportunities that leverages our global expertise such as defense, power, and infrastructure.

Speaker #3: We are confident in the sizeable opportunity that Asia and Australia markets represent over the long term. And now I'd like to move to slide 11, and the results of our nuclear business.

Speaker #3: We continue to demonstrate significant growth. Achieving an organic revenue increase of 56% compared to the second quarter of 2024. Our nuclear backlog is now 5.6 billion dollars.

Speaker #3: 223% higher than our backlog as of June 30. 2024. Which continues to primarily grow through life extension bookings in the can-do fleet in Canada, Europe, and Asia.

Speaker #3: Segment-adjusted EBIT grew 47% to 64 million dollars in the second quarter. And segment-adjusted EBIT margin was approximately 11%. Segment-adjusted EBITDA grew 42% year over year and the margin now stands at 25%.

Speaker #3: On slide 12, we highlight the achievements across our nuclear can-do and services portfolios. In our can-do business, Canadians for can-do continues to gain support and we're actively engaging in bidding discussions for several large new nuclear projects in Canada.

Speaker #3: And abroad. In Europe, we entered into an agreement with EDF, one of the world's leading electricity production and distribution companies. This is an important agreement for our nuclear business.

Speaker #3: Bringing opportunities to share capability and expertise in support of both our organizations taking advantage of the renewed global interest in nuclear power. In our services business, as I noted earlier, we're awarded the contract for the first of four SMRs in Ontario.

Speaker #3: We also are continuing new bill support at Hinckley Point C and Sizewell C as well as decommissioning services at Sellafield in the UK. Additionally, we continue to expand our nuclear capabilities in the US as the Department of Energy provided our joint venture the notice to proceed for the operational maintenance of the Portsmouth and Paducah gaseous diffusion plants.

Speaker #3: And lastly, Atkinsrealis is part of a new pioneering partnership with the Nuclear Decommissioning Authority in the UK, which we'll see innovative technology deployed for the first time on a nuclear site to remotely and autonomously sort and segregate radioactive waste.

Speaker #3: This is an important step to operate more safely and more efficiently on site. Our year-to-date nuclear performance and backlog record high levels provide a strong foundation for 2025.

Speaker #3: As such, we are raising once again in this quarter our full year revenue outlook to a range of 2 billion dollars to 2.1 billion dollars.

Speaker #3: Turning to slide 13, a reminder that we are capturing near-term and long-term can-do revenue opportunities within our nuclear business. The potential contracts you see on this slide showcase a massive opportunity for Atkinsrealis and could deliver significant growth for the foreseeable future.

Speaker #3: These represent profitable contracts and highlight our real backlog and our growing teams who deliver real projects every day. Our greater than 5 billion dollar nuclear backlog achievement is just the start.

Speaker #3: As our customers are continuing to recognize our nuclear expertise, we've been working hard to bolster our backlog with high-quality wins. Total backlog does not include follow-on stages for our recent wins and a very small amount of can-do new.

Speaker #3: We cannot overstate the significant opportunity in front of Atkinsrealis in the nuclear sector. Now I'm ing to slide 14 and I'll some LSDK projects in capital businesses.

Speaker #3: In our links on segment, revenue organically grew 11% year over year. Links on realized a 360 basis point of EBIT margin expansion in the second quarter as operational improvements continue to positively flow through the business.

Speaker #3: Backlog increased 28% to 2.1 billion dollars at the end of the quarter. We are seeing backlog improvement across the Americas, Europe, and the Middle East.

Speaker #3: On LSDK projects, segment-adjusted EBIT was in line with expectations. Commissioning and testing the Ontario Eglinton project is progressing well and the backlog decreased 40% year over year at the end of the second quarter as work continues to progress on the REM project.

Speaker #3: On capital, we completed the sale of our interest in Highway 407 and received our last dividend of 13.5 million dollars in April. Other assets continue to perform well.

Speaker #3: I'll now turn it over to Jeff to discuss our financial results and 2025 high outlook.

Speaker #4: Thank you, Ian. And good morning, yone. Turning to slide 16, total IFRS revenues increased 15% year over year totaling 2.7 billion dollars. Which included revenue increases of 6% in engineering services, 59% in nuclear, and 16% in links on.

Speaker #4: Total segment-adjusted EBIT for the quarter increased 18% to $246 million, mainly due to AtkinsRéalis services. Capital's $19 million adjusted EBIT was offset by the LSDK projects' negative EBIT of a similar amount.

Speaker #4: Corporate SG&A expenses from PSMPM totaled 30 million dollars in the quarter. Below Q 2024, as expected. We continue to anticipate that these expenses should be between 120 and 130 million dollars for the full year.

Speaker #4: Restructuring and transformation costs were 34 million dollars in the quarter, mainly due to a one-time adjustment related to the disposal of a business in prior year.

Speaker #4: We expect these costs to be lower in Q3 and Q4 and now expect them to be approximately 90 million dollars the full year. The IFRS net income this quarter was significantly higher than in Q2 2024 mainly due to a 2.6 billion dollar gain or 2.2 billion after tax on the disposal of the company's remaining 6.76% interest in the Highway 407 ETRs.

Speaker #4: The income tax expense was higher in the quarter due to the gain on the Highway 407 sale. The tax rate for adjusted PSMPM net income was approximately 13% in the quarter and 19% after six months.

Speaker #4: And therefore, we now expect the tax rate for the full year on our adjusted PSMPM net income to be in the mid-20%. Adjusted EPS from PSMPM for the quarter increased by 59% to 78 cents per diluted share.

Speaker #4: Compared to 49 cents in the second quarter last year. And as Ian mentioned, our backlog ended the quarter at a record high of 20.9 billion dollars.

Speaker #4: 32% higher than at the end of June last year. With new record high levels in engineering services regions and nuclear. Now let's move on to slide 17 and free cash flow.

Speaker #4: Net cash used for operating activities totaled 102 million dollars for the quarter. This was mainly driven by a stronger Atkinsrealis services EBITDA delivery and lower LSDK projects' cash usage.

Speaker #4: Offset by the timing higher working capital usage. We continue to expect operating cash flow to be in excess of 300 million dollars for the full year 2025.

Speaker #4: Similar to 2024, cash generation is expected to be heavily weighted to second half of the year. After CapEx of 37 million dollars, which included 19 million dollars for the development of Monarch and the payment of lease liabilities of 24 million dollars, our free cash flow stood at negative 163 million dollars for the quarter.

Speaker #4: I'd like now to move to slide 18 and build further on our capital allocation status. Earlier, Ian highlighted our progress in delivering on our capital allocation priorities in the quarter.

Speaker #4: As you can see on the slide, during the second quarter, we strengthened our balance sheet, invested in the business, and returned capital to our shareholders.

Speaker #4: Driven by the proceeds from the sale of our remaining interest in the Highway 407, our cash on hand increased to 953 million dollars; our recourse debt decreased from 1.1 billion to 695 million.

Speaker #4: Compared to December 31st, 2024, and as a result, our leverage ratio is negative 0.3 times. We have also repurchased approximately 9 million of our shares year to date returning nearly 800 million dollars to our shareholders.

Speaker #4: As discussed earlier, our focus going forward will be primarily through investing in the business. Particularly with acquisition opportunities that fit our strategic financial and cultural criteria.

Speaker #4: We would expect to continue to execute on our bolt-on acquisition strategy that over the next 18 months would result in a return to a net recourse debt to adjusted EBITDA ratio in our targeted range of one to two times.

Speaker #4: I'd like to now turn to my final slide, slide 19. As you have also heard Ian say on nuclear, this end market continues to be very strong.

Speaker #4: The demand for our services continues to grow and our backlog is at a new record high. Therefore, we are again increasing our nuclear revenue outlook to be machine two and 2.1 billion for the full year 25, from the previous range of 1.9 to 2 billion dollars that we outlined last quarter.

Speaker #4: On the other hand, we are decreasing the engineering services region's 2025 organic revenue growth outlook over 2024 to mid-single-digit percentage. From the previous range of 7 to 9%.

Speaker #4: Reflecting lower than expected revenue growth in the USLA and EMEA segments. Note that we expect David Evans' revenues, which is excluded from this organic revenue growth, to be around 300 million dollars for 2025.

Speaker #4: We remain confident in our medium-term target of 8% plus revenue growth for engineering services. As outlined in our delivering excellence driving growth strategy, and see the lower growth rate of 2025 as temporary in nature.

Speaker #4: All other financial outlook metrics for the full year 2025 are maintained. And with that, I'll now hand the presentation back to Ian.

Speaker #3: Thank you, Jeff. We had a strong quarter in the first half of the year. Marked by increased demand for our engineering services and nuclear capabilities, alongside strategic internal actions to strengthen our capital structure.

Speaker #3: As I stated early, our strong balance sheet and our appetite for growth puts us in a distinctive position to capitalize on opportunities that may arise in the current macroeconomic landscape.

Speaker #3: Energy transition and infrastructure development needs are fueling growth in our markets. Where we have either built a strong foundation or are continuing to land and expand.

Speaker #3: We are doing this under the guide of our delivering excellence and driving growth strategy, which focuses on optimizing the business, accelerating our footprint in growing end markets and regions, and exploring untapped opportunities.

Speaker #3: We have accomplished a lot in our first six months under this strategy, but we are just getting started. I want to thank our 40,000 employees for their hard work and dedication.

Speaker #3: Quarter over quarter, we continue to incrementally build great things at Atkinsrealis. And we would not be able to do so without the dedication and expertise of my colleagues around the world.

Speaker #3: So with all of that, let's open it up for questions.

Speaker #1: Certainly, and our first question for today comes from the line of Saad Bahad Khan from RBC Capital Markets. Your question, please.

Speaker #5: Great. Thanks and good ning. Maybe you could just dig a little bit deeper into sort of the engineering side and maybe just maybe provide a bit of color on our preamble, but hoping to get a bit more understanding of, you know, how the Q2 evolved relative to expectations.

Speaker #5: If you can get into some of the specifics around the regions that were supported, what you're seeing in the US, and kind what you have baked in for H2 now in the engineering business.

Speaker #5: Relative to when we last spoke. Thank you.

Speaker #3: Yeah, for sure. So I think the first thing I'd say is what we've seen is broadly in line with what we signaled earlier in the year, Q1.

Speaker #3: A couple of ings perhaps have moved further away from us than we expected. The underlying growth of business in all regions is good. And so we have confidence in the ability to deliver on the rest of the year.

Speaker #3: And going forward beyond that. Now, there are really three specific things that gave us some headwinds. And the first, we have signaled before, is we had this large battery factory in Canada which was not moved forward to phase two.

Speaker #3: It was canceled. And there were very strong revenues. In H1, all the way through, actually, Q4 23, all the way through to H1 24.

Speaker #3: So that's behind us. And we'll see better year over year Canada growth. Canada is actually performing really well. Happy to kind of go into a more detail later.

Speaker #3: EMEA, I think EMEA is interesting. There's some reprioritization there. We are not able to secure yet the phase two of a very large contract.

Speaker #3: That's been delayed. And from where we see it right now, it's going to delayed significantly. We were expecting that in Q1. It's probably, I don't even know if it's Q3 or Q4 now.

Speaker #3: But underlying, again, the business is at a level that we're pretty happy with in EMEA and pretty ong. We're not about to go around chasing low-margin work.

Speaker #3: To try and build those revenues. So EMEA growth is really going to come from Asia and Australia where we've got very, very small businesses.

Speaker #3: And the US, our US business also has the minerals and metals in there. There was a year-over-year issue but also in the US we've en some of the projects get delayed state by state.

Speaker #3: I mean, we're not federally exposed so we're not really exposed to any federal adjustments that have been seen in the industry. But we have seen state by state.

Speaker #3: Now, actually, we're seeing those coming back. And as we develop our pipeline going forward, it looks pretty good. And the growth looks pretty good.

Speaker #3: And the natural fact, you ow, in H1 when you take out the the mining contract, the underlying growth is still reasonably strong. So for all those reasons, we've viously developed our pipeline and done some analysis on a second half.

Speaker #3: And felt that we should lower our outlook. But if you look at the backlog, which is a real forward-looking indicator, it's actually very strong.

Speaker #3: And remains strong. At 6% for the engineering services regions. So I think we're in, you know, I think we're in good shape for the future.

Speaker #3: But as I said, some specific headwinds.

Speaker #5: Got it. Thanks. And then just from a follow-up, maybe if we just dig a little bit into kind of your balance sheet position, talk a little bit about the pipeline of M&A opportunities.

Speaker #5: Obviously, the first larger transaction is now closed. You did a large buyback. Let me just, if you can, walk us through plans for the rest of the balance sheet capacity.

Speaker #5: Pipeline on M&A and just a little bit more color there. Thanks very ch.

Speaker #3: So clearly, we are very pleased that we have been able to deliver against all of our investor-day capital allocation priorities. And as I said in the in the presentation and in the in the narrative, that those three things to strengthen the balance sheet return funds to shareholders and and and and and invest in the are all kind well progressed or in play.

Speaker #3: I'm going to let Jeff talk to the the the the kind of strength of the ance sheet and the position going forward on the returns to to shareholders.

Speaker #3: But our key priority and our key priority now is inorganic growth. It's investing in the business for growth. And our strategy for for M&A remains the same as as I've said before.

Speaker #3: We're not about to do, you ow, a major transformational acquisition. We're going to stay in our lane. For for the short term, businesses the size of David Evans looking at white space geographically or end markets looking at primarily platforms to grow organically, revenue synergies, and we're very excited about that because clearly we've got the appetite, the markets there, and and we've got the balance sheet to do it.

Speaker #3: So Jeff, maybe just a bit on the the the the the buyback and the the balance sheet.

Speaker #4: Yeah. I mean, I think to build on that point, Ian, you know, we see a great pipeline of opportunity. both in our priority market for M&A in the US, but you know, also elsewhere.

Speaker #4: combined that as as Ian has said, that being our our primary focus, we have bought back, you know, a significant number of shares year to date.

Speaker #4: And you know, we would expect that, you know, therefore to be you know, to be fairly small, you ow, in the remainder of the year will be a bit opportunistic that.

Speaker #4: but as Ian said, you know, the real focus will be continuing to deploy capital in bolt-on and tuck-in acquisitions in those white spaces.

Speaker #5: Great. Thanks very much.

Speaker #3: Thank you.

Speaker #1: Thank ou and our next question comes from the line of Chris Murray from ATB Capital Markets. Your question, please.

Speaker #6: Yes. Thank ou. Good morning. You know, maybe turning to the nuclear business, you know, certainly some good growth and things that we're eing there.

Speaker #6: But I was going to ask you, can we talk a little bit about, you know, maybe outside of the can-do opportunities which, you know, seem like fairly well understood and pretty massive.

Speaker #6: Can you talk a little bit about other other pieces of the nuclear business where you're seeing growth and how that's evolving? There's lots of discussion about, you know, the various forms of SMRs that are happening down in the US, so anything you can add to what you're eing there and and how you think that that could drive into the uclear business on a go-forward basis would be helpful.

Speaker #3: Yeah. Yeah. For sure. And as you ow, we kind of think of our business now, in in our nuclear sector in two halves. You know, we think about it as can-do where we have the technology.

Speaker #3: and we deploy that technology. But we've also got a very, very comprehensive services business, full services nuclear business that operates globally. And there's quite a few interesting things in the services businesses to, you ow, rightly point out in the question.

Speaker #3: That that are happening. I mean, let's start with the SMRs. I mean, you know, we do not have an SMR. We chose not to in our can-do fleet.

Speaker #3: we decided to be agnostic to technology. And we decided to support the the first, I would say, definitely North America, probably the first SMR, in the the global north.

Speaker #3: the developed world. At the Darlington site, with GE Hitachi. And we are playing a role called Architects Engineering or SIN, the award for a 450 million dollar contract to play that role in the development of that first SMR.

Speaker #3: So for Atkinsrealis, I think being involved in the very first SMR is is a game changer for for our brand as a nuclear business.

Speaker #3: other SMRs around the planet are are trailing. I I would say that the closest to it in terms of being deployed would be this is an opinion.

Speaker #3: It's not a fact. It would be Rolls Royce because they've been selected by the UK government, to deploy, their SMR, across the UK. We are a partner of Rolls Royce also.

Speaker #3: and we've been working with them through the development of that SMR. we are not currently partnered with any of the US SMRs. but having said that, we're we're not aware of any kind of, you know, commencement of of of construction.

Speaker #3: There's a lot of MRUs in place. But I'm not aware of anything that's actually physically being deployed right now. But we keep an eye on that space.

Speaker #3: Because clearly, the US is a an exciting place for nuclear. And not least of which, would be through the hyperscalers as they look to find solutions for their electricity for their data centers.

Speaker #3: So we've got a very keen eye on that. obviously, nothing to really talk to of any substance right now, but but we're the story closely.

Speaker #3: And and then dealing with waste and and remediation of of nuclear waste, we've we've just won some contracts at Sellafield in UK, which is which is great.

Speaker #3: And as you ow, we have a a strong business in the US, which works for the the DOE. on their on their contracts. And we own technologies as well.

Speaker #3: With IP connected to them for decommissioning and waste management. And then, of course, this partnership we have with EDF is pretty significant. We are supporting them on non-nuclear engineering at Hinckley.

Speaker #3: And doing the same now at Sizewell. As Sizewell has got the go-ahead by the UK government. And at Peak, in Hinckley, we would have had 800 engineers and we would expect the same at Sizewell.

Speaker #3: Very significant contracts, but we're also helping EDF in France. Our French-speaking contingent of engineers in the nuclear sector are working in France supporting EDF.

Speaker #3: So there's a lot going on outside of can-do. And appreciate the question because you know most of what we've ked about in the past is all can-do.

Speaker #3: A long answer.

Speaker #6: No, it was a good one. Thank you. And then I'm not sure if we want to take this one but I guess more conceptually now.

Speaker #6: And I know we talked a little about this at the investor day but you ow on a go-forward basis now that you've sold the 7, you know it looks like links on's continuing to be you know growing or maybe stable or we'll leave it at that.

Speaker #6: LSDK is running off but you still got the capital business. You know how do we think about you know now that you've got the financial flexibility don't really need the additional funding?

Speaker #6: How do we think about what business looks like in a year with all these other little bits and pieces kind of kicking around?

Speaker #4: Yeah. Chris, this is Jeff. Maybe I maybe I'll take a a shot at that. I mean, I think I think where we're you know rapidly getting to and I think you're right as we get into 2026 you know what we really have primarily is you know the world-class engineering services and nuclear business that we've always said you know that's what we're building and you know that's the long-term you know future of of the organization.

Speaker #4: You know in terms the sort of you know big elements. you know therefore you know I think what you'll see is you know LSDK will become you know very little by next year.

Speaker #4: 'll be a bit maybe a bit of you know of overhead related to you know just kind of finishing off any punch list items and collecting claims.

Speaker #4: you ow links on really pleased with sort of where it is but you know ultimately it's a fairly small part of the business. You know and capital will now be the same.

Speaker #4: You know there's really just a you know a handful of smaller investments left. So you could almost think of it as you know the engineering services regions and nuclear you know and then you know and then other you know kind of a small other element picking up the other pieces.

Speaker #4: But it'll really be, you know, a pretty simple business in terms of how you would think about, you know, strategically and performance-wise, driving it forward.

Speaker #6: Okay. Yeah. I an, the plan I'm uming is still to divest links on at some particular point. There's no thought to keep it around?

Speaker #4: Yeah. I mean, it's you know as I said, it's a as we've ways said, you know we think it's a it's a good business and a good market.

Speaker #4: We've invested a lot in terms of improving its operational capability and its performance. We're seeing that coming through. You know at this point, we haven't seen anyone you know despite our efforts you know giving us you know what we think is kind a reasonable value for the business.

Speaker #4: And you ow so we'll continue to explore our our options including you know ultimately if we end up holding it for a longer period of time.

Speaker #6: Okay. We'll get there. Thanks, folks.

Speaker #5: Thank ou.

Speaker #1: Thank you. And our next question comes from the line of Yuri Link from Kennecour Genuity. Your question, please.

Speaker #7: Hey, good morning.

Speaker #5: Good morning.

Speaker #7: A follow-up on on David Evans. I ink Jeff mentioned 300 million of revenue for 2025. can you just confirm that that's US dollars and is that for the for the entire year or or just for the period that will be consolidated in your financials?

Speaker #4: Yeah. Happy to do it. It's actually 300 million Canadian. we see for this year. and obviously the you know the the quarter we had in Q2 was short a couple of weeks.

Speaker #4: We can kind of close it till mid mid-April. so slightly higher on a quarterly run rate. in you know in Q3 and Q4.

Speaker #7: Okay. So so that's not their full year revenue in in CAD?

Speaker #4: No. No. That's just that's what we will pick up in our financial statements having owned it from you know April 11th till the end of 2025 we expect.

Speaker #7: Yeah. That makes sense. Okay. can you can you kind give us more detail or or break out the the impact of the the mining business on the USLA?

Speaker #7: organic growth contraction and and maybe talk about how some of the the other end markets in the in the US did on the engineering side?

Speaker #4: Yeah. Yeah. For sure. I mean, I think so. If we think about the U.S. first, I mean, as I said in the kind of brief overview of the U.S., there are a couple of things.

Speaker #4: So the the the the mining business is in there. And and we got some year over year kind of issues in there with one big contract.

Speaker #4: That, again, we would expect to see diminish in the in the in the second half. The the underlying growth in the US business certainly going forward from here in the pipeline development is actually closer to our original range frankly.

Speaker #4: We have seen in the first half of the year in the pure U.S. engineering business a bit of slowdown, state by state.

Speaker #4: In a couple of states to Texas. of Department of Transport work. Now we've seen those coming through. So it it wasn't really cancellation or lack of funds it was you ow with with all the volatility that we've seen across the US it was kind of holding back a bit.

Speaker #4: But we've seen those coming out. So in simple terms, positive growth first half in US purely. and almost back to where we'd expect it to be second half.

Speaker #4: But obviously we've had an impact. So that that's that's one of the contributors to changing outlook for the full year. And I think the other one that contributed to changing the outlook for the full year was the EMEA return.

Speaker #4: And and and and as I said, you know that that there's been some re-prioritization of projects. Now we haven't suffered too much actually in that.

Speaker #4: Because our strategy in Middle East, particularly Saudi Arabia, was always to follow big programs that we believe are profitable programs that are at the backing of the government.

Speaker #4: now NEOM did pull back a bit. not too much effect. But one of these other big projects in Riyadh has got pretty seriously delayed.

Speaker #4: I mean, we were expecting a Q1 kind of move forward and as I said, I'm not even sure it's going to be Q3 now.

Speaker #4: So that's obviously had an effect. But we are we are really comfortable with our business in the Middle East. You know we've we've grown there a lot.

Speaker #4: We've got good profitable work. And we're not going to chase you know unprofitable work. To fill the gap so to speak. and that's why we've kind of pulled down the outlook for rest of the year.

Speaker #4: Now, as I see EMEA going forward, I see enough opportunity in the Middle East to keep it growing at a reasonable rate—status quo sort of thing.

Speaker #4: But our real growth for EMEA will come out of Asia and Australia. We have new president looking after the the EMEA region. We're ing a lot of work right now.

Speaker #4: And we're we're tually no business in Australia, in Asia. So so we're we're going to be seeing the EMEA region grow in line with our with our other good regions.

Speaker #4: And then, when you look at what's happening in Canada and the UK, the UK is doing really well for us. We have a fully diverse business across the UK.

Speaker #4: A backlog is up 13%. And we've organic growth of 5% in the UK. And now with the 1.3 trillion dollar infrastructure strategy being announced across the country, in in in the things that we are good at, it's it's a etty positive outlook for infrastructure.

Speaker #4: And you'll see in the quarter you know we won work in water for on the unpaid program. We won national highways work. And we're ning work back at Heathrow now that they've announced the third runway.

Speaker #4: So, we’re really pleased with the UK. Canada is doing well. And when you think that the EBITDA is up 330 basis points, 430 basis points.

Speaker #4: The backlog is up 5%. got some good wins. From East Harbour Metrolinx. GTA, the airport authority in in in in Toronto. The Alto program.

Speaker #4: And now with Bill C5, I I really feel confident about Canada having a very strong commitment to infrastructure. you know I've personally been involved in some round tables.

Speaker #4: And I I'm feeling really positive about it. so all in all, adding our engineering services business, if you think about a long-term guidance, a long-term outlook, it's going to be there.

Speaker #4: but we've had to pull it back a little bit this year.

Speaker #7: Okay. Thanks for the color, guys.

Speaker #1: Thank you. And our next question comes from line of Krista Friesen from CIBC. Your question, please.

Speaker #8: Hi. Thanks for taking my estion. maybe just on the David Evans acquisition. first one in in a while. Can you just provide some color on how the integration is going there and and maybe any surprises that you've encountered positively or negatively?

Speaker #4: Yeah. For sure. and obviously we're you're right. You know it's our it's our first first acquisition for a while. And we we spend time to to find something which was of quality.

Speaker #4: We will always follow that strategy going forward. It is a it is a great company. with great culture. And a great track record and reputation.

Speaker #4: obviously it's early days. But but we're we're we work with them a lot. you know through the due diligence period. And we've the ground running.

Speaker #4: And they are 11 weeks in. we are focused on revenue synergies. we're we're ocused on doing what we you know we we said we would do with this business, which is use their use it as a platform, use their connectivity, and track record in the West.

Speaker #4: you know specifically Oregon and California. Washington. And add Atkinsrealis to it. And we've identified a a very significant pipeline of bids that they would not have had the scale to bid.

Speaker #4: And we have won our first work together, and we're winning some work together. So far, so good. We see the teams there.

Speaker #4: As in the main very happy with the with the relationship. And and I've got some good leaders that are working with them day to day that are that are very should I say you ow keen to make sure this works.

Speaker #8: Okay, great. And then maybe if I just follow up on the nuclear conversation. You announced the partnership with EDF about a month or two ago.

Speaker #8: And then just a few weeks ago, EDF kind of came out and said that they're oking at pulling back a bit from some of the overseas work.

Speaker #8: does this does this impact you or does it create a maybe some opportunities for Atkins?

Speaker #4: Yeah. No. I see I see that as opportunities. I mean, so so we've we've had a ationship with EDF for many years, at Hinckley.

Speaker #4: we started very, very small at Hinckley. Hinckley in Hinckley C in in the UK is a is an EDF technology. And we started on a very small contract there.

Speaker #4: And we ended up with this very significant kind engineering contract to integrate everything that was non-nuclear and in the design. And I ink we ended up working really well with them.

Speaker #4: And you know I, along with my president, personally met their CEO a number of times. We worked well with their senior leaders.

Speaker #4: And we we we're trying we're trying to make sure that as this nuclear renaissance really takes hold globally, that capacity human capacity, particularly, and expertise doesn't hold us back on the can-do deployment.

Speaker #4: And we are like-minded with EDF. in that they've got a big deployment of their technology in France now. And we believe that you know there can be a one plus one equals three.

Speaker #4: in terms of building capacity and relationships and deployment expertise. So so that's kind of the genesis of this in the long term. And you know I would go on to say that we have a very differentiated privileged position in can-do.

Speaker #4: In that, we already have six and a half thousand professionals working in the business on life extension work. That is not a situation that other nuclear technologies across the planet, apart from EDF and the Chinese, would have.

Speaker #4: Because there just hasn't been a big build-out recently. So I think having partnerships like that to help us build capacity to help us get ready for the really big wave that we expect is a is a is a is a very good and advantageous thing.

Speaker #4: That's the genesis of it.

Speaker #8: Thanks. Thanks for the color. I'll pass the line.

Speaker #4: Sure.

Speaker #1: Thank you. Our next question comes from the line of Devon Dodge from BMO Capital Markets. Your question, please.

Speaker #9: Yeah. Thanks. Good morning. I wanted to come back to want to establish questions more specifically slide 18 and the and the chart showing your financial leverage.

Speaker #9: which you ow has it coming down over the next 18 or coming up over the next 18 months. look, we're assuming free cash flow will be positive.

Speaker #9: So it seems like it's driven by capital deployment. I just wanted to clarify if this is intended to be more illustrative of what is possible or is it more of an indicator for what you see as the probable pace of capital deployment?

Speaker #9: And then, based on your comments, it just seems that most of that spending will be directed towards M&A. Just wanted to confirm that.

Speaker #4: Yeah. It's it's Jeff. Why don't I take that? so I think our view is is that that is directionally correct. and as I said in my script, over the next 18 months, we would expect expect to deploy capital primarily from you know a bolt-on M&A acquisition perspective.

Speaker #4: that would see us you know moving our way back to you know at least being at the low end of that 1 to 2 times range.

Speaker #4: By the end of 2024.

Speaker #9: Interesting. Okay. Okay. And then they just Jeff, can you remind of the timing for Atkins to acquire the remaining interests? Of David Evans?

Speaker #4: Yeah. And we've we have a route to get there. It's dependent you know on a couple of different elements. So we would expect over the next you know kind of few years that we'd ultimately end up with you know 100%.

Speaker #4: But you know it could vary around.

Speaker #9: Okay. Okay, so second question. Look, I think we all recognize it's difficult to get specific on the timing of any new build projects in nuclear.

Speaker #9: But you know, based on the ongoing discussions that you have with clients in Canada, China, and elsewhere, is there a framework for when you expect to see these contracts come forward?

Speaker #9: And where we stand right now, is there more near-term optimism for these emerging opportunities in Canada? Or could some international opportunities come forward first?

Speaker #4: So that yeah. Thanks for the question. I mean, our priority is Canada. I mean, that that's we're a Canadian company. And you know the the origin of the of the technology is Canada.

Speaker #4: So our priority is Canada. We're doing a an extensive amount of work trying to position Atkinsrealis as the chosen technology. There's no given here, right?

Speaker #4: For the two announced large nuclear plants at Wesleyville and Bruce. So that they're announced as sites that are that are allocated for that. We we are working hard to ensure that we're selected.

Speaker #4: And I can't you know it's not it's not my decision. But I I I I think that's not the s. That's months, right? would be my read.

Speaker #4: But again, you know that that's my view, right? It's not a fact. Going across there, there are other active provinces, other than Ontario, that I would say are thinking about "can-do."

Speaker #4: New Brunswick and Alberta. And again, those are public. Obviously, we're working hard to make sure we are the right solution.

Speaker #4: to to to to to to win those contracts too. So that's a very very significant amount of work. Beyond that, we we have two geographical areas that we believe new builds of can-do is possible.

Speaker #4: And we are actively in discussion, me personally as well. Eastern Europe, I think, because Romania already has a nuclear capability and a can-do set of reactors, and we're building there. I believe adjacent countries to Romania and Eastern Europe would see, and do see, can-do as a solution.

Speaker #4: I wouldn't expect to see anything there this year in terms of MOU or announcements. But we could see something next year. in Asia, there there are a number of countries that we are engaged in discussions this is because they're countries that don't have a nuclear technology of any kind now and a nuclear capability.

Speaker #4: This is going to e a bit longer. And the way this would probably play out is by ourselves getting some paid mandates to help them establish a regulatory framework help them establish a capability in country.

Speaker #4: And those are the kind conversations that we've got now. And and we're even doing some work in in in one country. This is a bit of a longer play.

Speaker #4: but very real. And we're talking of three to four Asian countries. So you can see there's a lot going on. I mean, and and I'm being very cautious not to kind of over-promise here.

Speaker #4: But but but I think over the next year or so, some of this will will come to to to the initial phases of of MOUs and the initial engineering phases.

Speaker #9: Okay. That was great commentary. Just one quick follow-up. how I think there's some media attention on applying for a license in in the US.

Speaker #9: Just wondering if you have a framework for how long you think that could take.

Speaker #4: Yeah. So we're we're we're very much exploring the US. I mean, clearly, as I said about the SMRs, which is true also for can-do technology.

Speaker #4: There there there's a very significant market for nuclear. I mean, the executive order signed by President Trump to deploy 300 gigawatts of nuclear electricity is is three times what was built in the the the '60s, 70s, '80s, and '90s.

Speaker #4: Now, there's only one US technology right now in large nuclear. last time that build-out, they had four. So there's learly an opportunity. we are looking at what it would take to get a get it through the licensing process.

Speaker #4: Which we don't think is is too difficult because they think about things very similar than Canada. that would probably be a process that would take us to a place towards the end of this decade that we could execute.

Speaker #4: but but that's not different from many other technologies. I an, you know even if they're indigenous technology was to get an order today, it would have to go through a licensing process for a project specific.

Speaker #4: So it will obviously take us longer. And that that's a t. But it but it but but but we're looking at it very, very seriously to position.

Speaker #9: Okay, excellent. That's great color. I appreciate it. I'll turn it over.

Speaker #4: Thank you.

Very significant.

We we are uniquely positioned with a a full service Global nuclear business.

And there is a very significant Renaissance in the nuclear business.

Our revenues have grown. As you can see exponentially, our backlog is up 228% it's not going to do that every quarter and every year, of course, but

if you look at the graph, the bar chart

Um, those revenues on that bar chart.

And those orders that we have.

Are on. They're almost secure for our outlook for this year.

And you can see that many of those projects are only first phase of projects to come.

Without new build. And if we add new build, and layer that in, then you can see growth through the rest of this decade. Um, I can't get drawn on what that would be in terms because you know, it's binary. You know I mean when a job it's significant you don't win, you know. So I can just say that we're confident this is going to continue to grow and be a really significant part of Atkins realities.

Okay, that's very good caller. Uh, Ian and maybe for Jeff in terms of capital allocation, you mentioned that the n10 to come back in the uh, optimize The Leverage over the next 12 to 18 months. Um, largely driven by, uh, bolt-on acquisition. So could you maybe uh provide more color about the uh, the number of Bolton that could be added or are you more talking about 1 or maybe a few, uh, just thanks.

And you know, like David Evans um, could be, you know, we do a couple that are smaller than that but just you know in order to get back to that leverage ratio you know, by definition we'll have to deploy a billion to a billion and a half dollars so you know that's another 3 David Avid Acquisitions or it's another you know 5 if they're slightly smaller um or 6 or you know. So I think you know with the pipeline we see of those kind of tuck in and bolt-on you know, type Acquisitions. You know we'd expect to be doing a handful of those um you know over the next 12 to 18 months and you know therefore that will um you know get us back to that to that level and at the same time you know we see a lot of value creation opportunity from employment Capital that way. So we you know, we think that's going to be a really good use of shareholders money at the same time.

Okay. And maybe just the last 1 very quick for Ian. Given the the valuation for nuclear. The, the growth profile do, do you see a case for monetizing uh, nuclear or spinning that up in, in, in the long term? Uh, Ian,

well, we're certainly not there in our thinking now um we we do see quite a lot of adjacencies between the 2 businesses in terms of complimentary engineering and scale uh

So when we're not, we're not in that place right now. Um,

You know, obviously, we people viewing everything, every, every strategy, right? Uh, but, but, but in the medium-term, no, no.

Thanks for the time.

Thank you.

Thank you. This does include the question and answer session of today's program. I'd like to hand the program back to Dennis Jasmine for any further remarks.

Thank you everyone. If you ever have any further questions, please, the number is 15 to contact me directly. Thank you very much and have a good end of the week. Thank you.

Thank you, ladies and gentlemen, for your participation. In today's conference, this does conclude the program. You may now disconnect. Good day.