Aecon Group Inc T.ARE

Legacy Project Settlements and Charges

[Kupotea]

Reasonably happy with the CGL pipeline settlement. Yes it would have been nice to receive compensation but this stock is being held back by the perceived risk of legacy projects and this is a major step forward in that respect. What confuses me is the accounting treatment of these legacy projects. 

In Q1 they recognize revenue for the legacy projects but have them as $0 impact on margin. Great news, clearly they over accounted for previous expenses and while it hurts gross margins the projects will have no impact on net income or ebitda going forward.

Now witth the CGL settlement there's a $127 million charge and they expect a $110 million charge in q2 in regards to their other legacy projects. If this is a charge against earnings what happened and why was non of this recognized in Q1? Or will both these charges be treated as $0 margin contribution in revenue? It would great to see the actual cash impact from these legacy projects and a clear methodology in how they're being treated in the financial statements.

Interested to see the markets reaction but either way as long as cash isn't materially impacted (according to the news release it's not for the CGL settlement at least?) we're approaching a positive inflection point.

[JayBanks]

Was that the last agreement needed on the 'legacy' projects, while The Bridge and Crosstown are still in construction the make whole agreements are done on those aren't they? Obviously, they are still before competition so not fully in the books yet, but the frame work breakdown of paying for the cost overruns is completed if I remember correctly. $237 /  61.8 shares = $ 3.835

[Henrye]

Basically everything is finally getting mopped in one swoosh, and Gordie Howe bridge is of no concern and will be baked into share value sooner then later.  All key details will be unveiled in Q2 report and explained by management during conference call that all should attend as this will be the pivotal meeting that will boost all cylinders that Aecon has been lacking. Perhaps Gabriel could

[Gabriel]

100%. While I was hoping to receive a compensation from CGL, the positive is that we are done with CGL as this was a big overhang on the stock price. When asked in March, what the company would do with its strong balance sheet, the answer was to await the results of this arbitration and the LSTKs. See excerpt below. The new CFO is booking a larger allowance for the remaining LSTKs.  

[Gabriel]

Our next question comes from Yuri Lynk with Canaccord Genuity Yuri Lynk: Maybe, I mean, obviously, the balance sheet's as strong as we've ever seen it almost no net debt there. And the underlying EBITDA of the business appears very strong. So how do we think about capital allocation here? And does the arbitration process, that's coming up in the third quarter on CGL, does not

[LComrade]

This board was very convinced Aecon would be receiving a payout on this claim: (https://stockhouse.com/companies/bullboard?symbol=t.are&threadid=36070560) Looking back - what do we think happened here?  Looks like another 237MM~ charge to Aecon this quarter for LSTK. 

[Gabriel]

The analysis you refer to was based on the factual publically available information which was shared with references and links, that you did not care to question or contribute. As you are aware, we do not have access to all the information but that does not prevent us from trying to draw conclusions from what is available and debate. In any case this closes the CGL episode for good and in my

[Henrye]

Welcome back! Again this concludes a clean up and mop up in isle 1,2,3 & 4 & and in one swoosh close up all the negative energy related to the 4 legacy items and as of July 1 st enter Q 3 /24 with a clean slate, and tons of positive energy as early as next week.  There is so much good news after this Canada Day weekend!  I have a feeling that many of us are now relieved with

[Henrye]

Any opinions on how the market will view this Friday's news release first thing on Tuesday? 

[Kupotea]

My guess is negative simply because the charge back headline is significant. There's also no context yet about whether this is the last charge back Aecon expects for the legacy projects. Institutional investors will probably see through that and appreciate how much this derisks the business but this stock doesnt have a lot of instiutional ownership so it's hard to say. It would be great

[Dibah420]

Market has made its views clear.  18% shave on s/p seems, to me,  excessive.  On the other hand a $123m impairment to clear the billion dollar overhang seems to be justifiable.  Management, as well as most people here, are now disencumbered of the hopes of the arbitrator doling out big bucks. Kudos to the new CFO.  Sometimes a fresh pair of eyes makes all the difference

[LComrade]

I can appreciate there is some synthesis of imperfect information that we all need to do. Perhaps I am more critical to counterbalance the excessively-positive perspective that others may hold. I have a significant stake in Aecon relative to my NW - we are in the same boat. In fact I agree that closing the CGL story was the right move. Get these bad projects off the books!  Why do I say