SNC-Lavalin earns $29.19-million in Q2 SNC-Lavalin Group Inc. has released its results for the second quarter ended June 30, 2021.
CEO Commentary
"We are pleased with the solid financial results for the first half of the year. SNCL Engineering Services delivered robust second quarter performance led by strong profitability within our three segments. Our LSTK projects progressed well, the related backlog continued to decrease, and discussions with our clients on compensation for the additional costs related to COVID-19 impacts have been constructive," said Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc. "We are also pleased to have recently closed the sale of a substantial portion of our Resources Oil & Gas business, which represents an important strategic milestone for the Company. With these second quarter results and the current trends across our businesses, we remain on track to meet our 2021 outlook expectations."
Second Quarter Results
Professional Services & Project Management are collectively referred to as "PS&PM" to distinguish them from "Capital" activities. PS&PM groups together five of the Company's segments, namely Engineering, Design and Project Management ("EDPM"), Nuclear, Infrastructure Services, Resources and Infrastructure EPC projects, while Capital is its own reportable segment and separate from PS&PM.
The Company's net income from continuing operations attributable to SNC-Lavalin shareholders was $29.2 million, or $0.17 per diluted share in Q2 2021, compared to a net loss from continuing operations attributable to SNC-Lavalin shareholders of $25.3 million, or $(0.14) per diluted share, for the corresponding period in 2020. This was comprised of net income from continuing operations from PS&PM of $26.1 million, or $0.15 per diluted share and net income from continuing operations from Capital of $3.1 million, or $0.02 per diluted share in Q2 2021. For the corresponding period in 2020, net loss from continuing operations was comprised of a net loss from continuing operations from PS&PM of $31.9 million, or $(0.18) per diluted share and net income from continuing operations from Capital of $6.6 million, or $0.04 per diluted share.
Q2 2021 net income included amortization of intangible assets related to business combinations of $20.5 million ($17.2 million after income taxes or $0.10 per diluted share) and restructuring and transformation costs of $15.2 million ($11.3 million after income taxes or $0.06 per diluted share), while Q2 2020 included amortization of intangible assets related to business combinations of $40.0 million ($32.7 million after income taxes or $0.19 per diluted share) and restructuring and transformation costs of $23.9 million ($20.9 million after income taxes or $0.12 per diluted share).
Adjusted net income from PS&PM(4) in Q2 2021 more than doubled and totaled $53.8 million, or $0.31 per diluted share, compared with $21.7 million, or $0.12 per diluted share, for Q2 2020. The increase was mainly due to an increase of 9.5% in Segment Adjusted EBIT(1) from SNCL Engineering Services and a decrease in the negative Segment Adjusted EBIT(1) in SNCL Projects, partially offset by a higher income taxes expense.
Financial Position and Operating Cash Flow
As at June 30, 2021, the Company had $662.9 million of cash and cash equivalents. The Company also has an additional $2.0 billion of available drawing capacity under its revolving credit facility. As at June 30, 2021, the Company had $1.0 billion of recourse debt and $0.4 billion of limited recourse debt and its net recourse debt to EBITDA ratio(7) calculated in accordance with the terms of the Company's Credit Agreement was 1.8, below the required covenant level of 3.75.
The Company's net cash generated from operating activities was $78.1 million in Q2 2021, compared to $129.8 million in Q2 2020. Net cash generated from operating activities in SNCL Engineering Services totaled $157 million in Q2 2021. The Company continues to anticipate that its net cash generated from operating activities in 2021 will be broadly breakeven, as positive operating cash flow from SNCL Engineering Services is expected to be largely offset by an operating cash flow usage in SNCL Projects.
Virtual Investor Day
SNC-Lavalin will host a virtual Investor Day on Tuesday, September 28, 2021, at 8:30 a.m. Eastern Time. Ian Edwards, President and Chief Executive Officer, Jeff Bell, Executive Vice-President and Chief Financial Officer, and other members of the leadership team will provide an in-depth review of the business strategy, financial outlook, and initiatives to drive long-term stakeholder value. A live webcast of the presentation, including question and answer sessions, will be available the day of the event on the Company's Investor Day 2021 webpage . Registration is required and can be completed in advance on the Company's Investor Day 2021 webpage. A replay of the webcast will be available on the Investor Relations webpage following the event.
SNCL Engineering Services 2021 Outlook maintained
The following statements are based on current expectations. These statements are forward-looking and the actual results could differ materially. The 2021 Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.
The Company continues to expect SNCL Engineering Services revenue for full year 2021 to increase by a low single digit percentage, reflecting current currency rates, compared to 2020, and for its Segment Adjusted EBIT to segment revenue ratio(2) to be between 8% and 10% for the full year 2021.
This outlook is based on the assumptions and methodology described in the Company's Annual 2020 Management's Discussion and Analysis under the heading, "How We Budget and Forecast Our Results" and the "Forward-Looking Statements" section below and is subject to the risks and uncertainties summarized therein and in the Company's 2020 Annual Management's Discussion and Analysis.
Quarterly Dividend
The Board of Directors today declared a cash dividend of $0.02 per share, unchanged from the previous quarter. The dividend is payable on August 27, 2021, to shareholders of record on August 13, 2021. This dividend is an "eligible dividend" for Canadian federal and provincial income tax purposes.