Aecon Group Inc T.ARE

Legacy Projects Impact on FY24

[Kupotea]

I may be wrong but did management confirm in the Q&A that Legacy projects will not have an impact on the company's earnings moving forward? 

if you look at slide 16 in the conference call presentation you can see revenue recognized for the legacy projects in the quarter but no impact on operating profits or adjusted EBITDA. I'm pretty sure an analyst asked them to confirm and the new CFO said something like gross margins would be 0% for these projects moving forward. 

My first question is how does that work? Are they truly breaking even now due to the contracts being renegotiated to cover cost or did they over allocate expenses in the past? Maybe this captures future anticipated claims against current costs but I'm certain that's not allowed under any accounting standard so it's probably not that.

It's weird accounting but the impact is likely to be highly positive. As shareholders we don't have to wait until 2025 to see the true underlying earnings of the business. Margins will be depressed a bit as they work off the 0 contribution legacy revenue but EBITDA and net income would pop immediately.

[Gabriel]

The gap between the projected cost to complete and the projected payments based on the contract is expensed at the end of the quarter so that the projects are completed at cost. They had it right as of December 31 so no further adjustements were made on March 31. Claims cannot be added to receivables unless approved by the owner or the delegated engineer as the case may be. Any settlements will

[Dibah420]

Gabriel  Your argument has merit as to why a CEO might prefer a 6 mth wait to wasting time yakking with a recalcitrant and disingenuous client. On another matter, here is Trudeau defending his Capital Gains policy.  TIFWIIW.  I promise this will be my last, on this topic. https://www.youtube.com/watch?v=ORWUT6kOotY I apologise in advance to the acolytes of Fraser Inst, 

[Henrye]

Gabriel, correct me if I am wrong.  Did someone at the conference said that Gordie Howe bridge is now responsible for 66% out of 300 million plus outstanding work on legacy projects? And if yes , please assess GH as we know, Aecon consortium received a favourable bump in dollars to complete it profitably. The balance on the problematic legacy projects represents a very small portion minus GH

[Gabriel]

Yes. The CEO said the majority of the LSTK backlog was associated to the GHB and then he said 2/3 so you are correct. Below is the excerpt for reference. LSTKs represent less than 5% of the backlog, two-third of which is doing great - see below. They said last quarter that another 90m is associated to CGL which will never be performed - second excerpt at the bottom of this post. The

[Henrye]

Thanks 

[Dibah420]

Thanks.  Let me try the "simply put"  way. Diminishing LSTK Overhang: March 31, 2023         $812 million Dec    31, 2023         $420  million March 31,2024         $330  million     incl   (GHB $220M, CGL $95M,  TO Subways $15M) Behind the breaking

[Henrye]

Simplification definitely confirming clear skies. And Wow to your RBC example of low valuation and question of if they even showed up . All my ( our) shares are held by RBC and I promptly via email challenged my VP of wealth management as to her opinion as to why as of late RBC continues to bash Aecon with very unfavourable analysis. What do they know exclusively that all others missed?  I

[Dibah420]

I went back to check the C.C transcript,  specifically the Q&A  part. RBC was definitely MIA. So do let us know how the good lady responds to your query. I am particularly curious to find out her excuse for why they neglected to attend an earnings call.

[Henrye]

Absolutely, and I rewrote my question to add no show as well. 6 dollars spread between RBC and CIBC ,  Asked for detailed report! 

[Henrye]

Here is Her ( RBC) response  Morning Henry As a reminder, we're independent from RBC Capital Markets and frankly I can't &/ unable to give you details on why there was a lack of participation in the Q&A section of the earnings call. It's possible that RBC analyst was on the line, but his questions were raised by other analysts. Who knows ~ Like I have mentioned &

[Dibah420]

Thank you.  Pretty much what I was expecting.  Nice purdah to hide behind. I believe that the RBC analyst missed the c.c. for whatever reason.

[Gabriel]

Thank you both for your posts. Now we know why RBC differs. 

[Alexcanada]

All my shares are held in my NBC and TD accounts and are available for sale for 30$. They will not use them to short the stock.

[Gabriel]

So you have access to the TD analyst report too. 

[Alexcanada]

Yes here is what's available : TD SECURITIES INC. - CANADA EARNINGS UPDATE April 26, 2024 Price: C$17.11 (04/25/2024) Price Target: C$18.00 HOLD (2) ESG SCORE: 72/100 BETTER-THAN-EXPECTED Q1/24 ADJ. EBITDA THE TD COWEN INSIGHT Overall, we view Aecon's Q1/24 results release as positive. Adj. EBITDA was strong relative to expectations, and no incremental losses were booked on ARE's

[Alexcanada]

I have also the Morningstar Quant report and LSEG stock report +. Gab, I can email them to you if you wish because they are difficult to post here.

[Gabriel]

Thanks Alex. I am ok with the TD report. Very appreciated. I am also very thankful to all posters. 

[Gabriel]

Henry, Suggest to ask her to send you the full analyst report. It is free to all clients. She will email it to you.

[Gabriel]

Considering we are mostly done with LSTKs.. we should gradually creep up to 30$. This is a repeat of SNC as Alex pointed out.

[Henrye]

I noticed that for the past few years, RBC analysts have been on the side of extreme caution and have no courage to finally let go of virtually non existent legacy projects and adjust their approach.  On another note, wondering who will be the constructor team on the new 413 hwy? Strongly agree on your creep up to $30