SNC-Lavalin Reports Strong Fourth Quarter 2021 Engineering Services Results, Provides Update on LSTK Projects and 2022 Outlook

MONTREAL, March 3, 2022 /CNW Telbec/ - SNC-Lavalin Group Inc. (TSX: SNC), a fully integrated professional services and project management company with offices around the world, today announced its fourth quarter and fiscal year 2021 results.

Fourth Quarter 2021 Financial Highlights

• Q4 2021 revenue of $1.9 billion, a 14.5% increase year-over-year
• Net loss from continuing operations attributable to SNC-Lavalin shareholders of $15.3 million, or $(0.09) per diluted share, compared to a net loss of $322.9 million, or $(1.84) per diluted share in Q4 2020
• SNCL Engineering Services revenue of $1.7 billion, an increase of 9.7%, or 11.9% based on organic revenue growth(1) (6), compared to Q4 2020
• SNCL Engineering Services Segment Adjusted EBIT of $237.4 million, an increase of 55.1% year-over-year, representing a 14.2% margin
• Includes favorable outcome of $93.0 million from a confirmed arbitration decision related to unpaid additional services performed on a completed contract in the EDPM segment
• SNCL Projects negative Segment Adjusted EBIT of $231.4 million, mainly due to unfavorable cost reforecasts, primarily driven by COVID-19, supply chain disruptions and inflation, causing project productivity losses, delays and cost increases on the last remaining LSTK projects
• A significant majority of the unfavorable cost reforecasts recorded in Q4 2021 represent management's best estimates of future expected costs necessary to fully complete the remaining LSTK projects
• With the expected completion of the majority of the remaining LSTK projects in the next year, management believes that the remaining potential for future additional financial risks, if any, to complete the projects should not exceed $300 million

Full Year 2021 Financial Highlights

• 2021 revenue of $7.4 billion, a 5.2% increase year-over-year
• Net income from continuing operations attributable to SNC-Lavalin shareholders of $100.2 million, or $0.57 per diluted share, compared to a net loss of $356.1 million, or $(2.03) per diluted share in 2020
• SNCL Engineering Services revenue of $6.2 billion, an increase of 3.3%, or 5.5% based on organic revenue growth(1) (6), compared to 2020
• SNCL Engineering Services Segment Adjusted EBIT of $660.4 million, an increase of 22.4% year-over-year, representing a 10.7% margin
• SNCL Engineering Services backlog of $10.9 billion as at December 31, 2021
• Net cash generated from operating activities of $134.2 million

"We finished 2021 with a solid performance in our Engineering Services business, which reported strong revenue growth and margin performance in line with our expectations, and exceeded our outlook for broadly break-even cash flow. The business continues to perform at a high level as we leverage our global capabilities, unique end-to-end services, and decarbonization solutions," said Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc. "We are executing on the Pivoting to Growth Strategy we outlined during our investor day and strongly believe that we have a best-in-class SNCL Services business, which should continue to deliver revenue growth and positive cash flows in line with our 2022-2024 financial targets."

"We continue to progress the wind down of our last LSTK contracts, significantly decreasing the backlog in 2021, and expect that they will be mostly concluded by the end of the first quarter of 2023. COVID-19 and cost inflation continue to have a significant impact in delivering these projects and resulted in project reforecasts and additional losses in the fourth quarter. However, with the majority of the remaining LSTK backlog expected to be completed in the next year, we have assessed that the remaining potential for future additional financial risks, if any, to complete the projects, should not exceed $300 million. We will continue to drive these projects to completion with the best resources and capabilities.

I am proud of our global SNC-Lavalin team, and enthusiastic about the way they are passionately delivering on our strategy as we enter an exciting phase of growth," added Mr. Edwards.

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.

IFRS Financial Highlights

Non-IFRS Financial Highlights

Lines of Business Performance

SNCL Engineering Services

The SNCL Engineering Services line of business (comprised of the EDPM, Nuclear and Infrastructure Services segments) continued to deliver solid results, benefitting from its global capabilities, unique end-to-end services, decarbonization and sustainable solutions, long-term client relationships and a strong public sector focus.

• Full year 2021 revenue was up 3.3%, compared to 2020, in line with the Company's most recent 2021 outlook, while Segment Adjusted EBIT was up 22.4% delivering a better than expected Segment Adjusted EBIT to segment revenue ratio of 10.7%. SNCL Engineering Services had organic revenue growth(1) (6) of 5.5% in 2021 compared to 2020.
• EDPM results for Q4 2021 and the full year include a $93.0 million favorable outcome from a confirmed arbitration decision related to unpaid additional services performed on a completed contract.
• Q4 2021 revenue of $1,670.8 million, was up 9.7% compared to Q4 2020. SNCL Engineering Services had an organic revenue growth(1) (6) of 11.9% in Q4 2021 compared to Q4 2020.
• Q4 2021 Segment Adjusted EBIT was $237.4 million, an increase of 55.1% compared to Q4 2020, representing a margin of 14.2%.
• EDPM Segment Adjusted EBIT of $179.3 million, representing a margin of 16.9%.
• Nuclear Segment Adjusted EBIT of $34.8 million, representing a margin of 15.8%.
• Infrastructure Services Segment Adjusted EBIT of $23.3 million, representing a margin of 6.0%.
• EDPM backlog increased 9.5% year-over-year, totaling $3.1 billion as at December 31, 2021. Total SNCL Engineering Services backlog amounted to $10.9 billion as at December 31, 2021, which included $6.2 billion of bookings for the year, representing a 1.01 booking-to-revenue ratio(1) (4).

SNCL Projects

The SNCL Projects line of business (comprised of the Infrastructure EPC Projects and Resources segments) continued to be challenged, as the Company continues to execute its LSTK projects exit strategy.

• Q4 2021 Segment Adjusted EBIT was negative $231.4 million, mainly due to unfavorable cost reforecasts, primarily driven by COVID-19, supply chain disruptions, inflation and commissioning challenges, causing productivity losses, delays and cost increases on the remaining LSTK projects.
• Productivity impacts due to COVID-19 increased significantly with the Omicron variant, including materially higher workforce absenteeism levels on some projects for periods of time. In addition, delays on certain equipment deliveries and significant increases in inflation impacted direct labor, materials and other costs across the projects. The impact of these was higher than foreseen by the Company in previous periods, and as a result, the forecasted costs to complete the LSTK projects had to be increased and adjusted in Q4.
• A significant majority of the unfavorable cost reforecasts recorded in Q4 2021 represent management's best estimates of future expected costs necessary to fully complete the remaining LSTK projects. These estimates reflect the assessment of the current and future challenging construction environment, as well as management and project site experiences from the last two years of the pandemic.
• With the expected completion of the majority of the remaining LSTK projects in the next year, management believes that the remaining potential for future additional financial risks, if any, to complete the projects should not exceed $300 million*. Such financial risks include COVID-19-related risks, such as absenteeism remaining higher than pre-Omicron levels through project completion, productivity losses not improving as expected in Q2 2022, and clients not recognizing the right to extension of time for projects, supply chain disruption-related risks, including lead times for key equipment, unknown commissioning risks and inflation-related risks worsening materially until the end of the projects.
• SNCL Projects backlog continued to decrease during the year, as the Company continued to execute and progress on its last remaining LSTK projects, and totaled $1.5 billion as at December 31, 2021, compared to $2.2 billion as at December 31, 2020.
• LSTK construction contracts backlog of $1.2 billion as at December 31, 2021, a decrease of $671.2 million from December 31, 2020.
• Reimbursable and engineering services contracts of $0.3 billion as at December 31, 2021, in line with December 31, 2020.

Capital

The Capital segment delivered strong results in Q4 2021, mainly due to the receipt of $40.6 million of dividends from Highway 407 ETR.

Financial Position and Operating Cash Flow

• Net cash generated from operating activities of $115.4 million in Q4 2021 and $134.2 million for the year ended December 31, 2021, which was better than the Company's 2021 outlook of broadly break-even.
• Net cash generated from operating activities in SNCL Engineering Services of $192 million in Q4 2021 ($544 million for the year ended December 31, 2021).
• Cash and cash equivalents of $608.4 million as at December 31, 2021.
• Recourse debt of $1.1 billion and limited recourse debt of $0.4 billion as at December 31, 2021.
• Net recourse debt to EBITDA ratio(3) calculated in accordance with the terms of the Company's Credit Agreement of 1.9.
• Net limited recourse and recourse debt to Adjusted EBITDA ratio(1) (5) of 1.7.

2022 Outlook

This outlook is provided as at March 3, 2022, to assist analysts and investors in formalizing their respective views on the year ending December 31, 2022. The following information is based on current expectations. This information is forward-looking and the actual results could differ materially. The 2022 Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.

This outlook is based on the assumptions and methodology described in the Company's 2021 MD&A 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 2021 MD&A.

Management expects for 2022 that SNCL Services organic revenue growth and profitability ratios should be within the ranges of its 2022-2024 targets, as outlined in the Company's "Pivoting to Growth Strategy" presented during the most recent investor day. Management also expects that in 2022 operating cash outflows related to the LSTK construction contracts, including the losses taken in Q4, should be more than offset by SNCL Services and Capital operating cash inflows. SNC-Lavalin is providing the following targets for the full year 2022:

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 March 31, 2022, to shareholders of record on March 17, 2022. This dividend is an "eligible dividend" for Canadian federal and provincial income tax purposes.

Fourth Quarter 2021 Conference Call / Webcast

SNC-Lavalin will hold a conference call today at 8:30 a.m. Eastern Time to review results for its fourth quarter of 2021. A live audio webcast of the conference call and an accompanying slide presentation will be available at www.investors.snclavalin.com. The call will also be accessible by telephone, please dial toll free at 1 800 319 4610 in North America or dial 1 604 638 5340 outside North America. You can also use the following numbers: 416 915 3239 in Toronto, 514 375 0364 in Montreal, or 080 8101 2791 in the United Kingdom. A recording of the conference call and its transcript will be available on the Company's website within 24 hours following the call.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world dedicated to engineering a better future for our planet and its people. We create sustainable solutions that connect people, technology and data to design, deliver and operate the most complex projects. We deploy global capabilities locally to our clients and deliver unique end-to-end services across the whole life cycle of an asset including consulting, advisory & environmental services, intelligent networks & cybersecurity, design & engineering, procurement, project & construction management, operations & maintenance, decommissioning and capital. – and delivered to clients in key strategic sectors such as Engineering Services, Nuclear, Operations & Maintenance and Capital. News and information are available at snclavalin.com or follow us on LinkedIn and Twitter.

Non-IFRS Financial Measures and Ratios, Supplementary Financial Measures and Non-Financial Information

The Company reports its financial results in accordance with IFRS. However, the following non-IFRS financial measures and ratios, supplementary financial measures and non-financial information are used by the Company in this press release: Organic revenue, Organic revenue growth (contraction), Adjusted EBITDA, Adjusted net income (loss) attributable to SNC-Lavalin shareholders, Adjusted diluted EPS, Booking-to-revenue ratio, Adjusted EBITDA to revenue ratio, Segment adjusted EBITDA to segment net revenue ratio, Segment net revenue, Net limited recourse and recourse debt to adjusted EBITDA ratio and Net limited recourse and recourse debt. Additional details for these non-IFRS financial measures and ratios, supplementary financial measures and non-financial information can be found below and in Section 13 between pages 53 and 72 of SNC-Lavalin's 2021 MD&A (which section and pages are incorporated by reference into this press release), filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the "Investors" section. Non-IFRS financial measures and ratios, supplementary financial measures and non-financial information do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS financial measures and ratios, and certain supplementary financial measures and non-financial information provide additional insight into the Company's operating performance and financial position and certain investors may use this information to evaluate the Company's performance from period to period. However, these non-IFRS financial measures and ratios, and certain supplementary financial measures and non-financial information have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Furthermore, certain non-IFRS financial measures and ratios, and certain supplementary financial measures and other non-financial information are presented separately for PS&PM, by excluding components related to Capital, as the Company believes that such measures are useful as these PS&PM activities are usually analyzed separately by the Company. Reconciliations and calculations of non-IFRS measures to the most comparable IFRS measures are set forth below in the section "Reconciliations and Calculations" of this press release.

Reconciliations and Calculations

Reconciliation of Adjusted net income (loss) from PS&PM to IFRS net income (loss) from continuing operations

Reconciliation of consolidated EBITDA and Adjusted EBITDA to IFRS net income (loss) from continuing operations

Calculation of Adjusted EBITDA to revenue ratio

Calculation of net revenue and segment adjusted EBITDA to net revenue ratio – Engineering Services

Calculation of organic revenue growth

Calculation of booking-to-revenue ratio

Calculation of net limited recourse and recourse debt to adjusted EBITDA ratio

Forward-Looking Statements

Reference in this press release, and hereafter, to the "Company" or to "SNC-Lavalin" means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements or associates, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or associates.

Statements made in this press release that describe the Company's or management's budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be "forward-looking statements", which can be identified by the use of the conditional or forward-looking terminology such as "aims", "anticipates", "assumes", "believes", "cost savings", "estimates", "expects", "forecasts", "goal", "intends", "likely", "may", "objective", "outlook", "plans", "projects", "should", "synergies", "target", "vision", "will", or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses and future prospects; ii) business and management strategies and the expansion and growth of the Company's operations; and iii) the expected additional impacts of the ongoing COVID-19 pandemic on the business and its operating and reportable segments as well as elements of uncertainty related thereto. All such forward-looking statements are made pursuant to the "safe-harbor" provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company's 2021 MD&A (particularly in the sections entitled "Critical Accounting Judgments and Key Sources of Estimation Uncertainty" and "How We Analyze and Report Our Results"). If these assumptions are inaccurate, the Company's actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company's assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to, matters relating to: (a) ongoing and additional impacts of the COVID-19 pandemic; (b) execution of the Company's "Pivoting to Growth Strategy" unveiled in September 2021; (c) fixed-price contracts or the Company's failure to meet contractual schedule, performance requirements or to execute projects efficiently; (d) remaining performance obligations; (e) contract awards and timing; (f) being a provider of services to government agencies; (g) international operations; (h) nuclear liability; (i) ownership interests in investments; (j) dependence on third parties; (k) supply chain disruptions; (l) joint ventures and partnerships; (m) information systems and data and compliance with privacy legislation; (n) competition; (o) professional liability or liability for faulty services; (p) monetary damages and penalties in connection with professional and engineering reports and opinions; (q) gaps in insurance coverage; (r) health and safety; (s) qualified personnel; (t) work stoppages, union negotiations and other labour matters; (u) extreme weather conditions and the impact of natural or other disasters and global health crises; (v) divestitures and the sale of significant assets; (w) intellectual property; * liquidity and financial position; (y) indebtedness; (z) impact of operating results and level of indebtedness on financial situation; (aa) security under the CDPQ Loan Agreement (as defined in the Company's 2021 MD&A); (bb) dependence on subsidiaries to help repay indebtedness; (cc) dividends; (dd) post-employment benefit obligations, including pension-related obligations; (ee) working capital requirements; (ff) collection from customers; (gg) impairment of goodwill and other assets; (hh) the impact on the Company of legal and regulatory proceedings, investigations and litigation settlements; (ii) further regulatory developments as well as employee, agent or partner misconduct or failure to comply with anti-corruption and other government laws and regulations; (jj) reputation of the Company; (kk) inherent limitations to the Company's control framework; (ll) environmental laws and regulations; (mm) global economic conditions; (nn) inflation; (oo) fluctuations in commodity prices; and (pp) income taxes.

The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the sections "Risks and Uncertainties", "How We Analyze and Report Our Results" and "Critical Accounting Judgments and Key Sources of Estimation Uncertainty" in the Company's 2021 MD&A filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the "Investors" section.

The forward-looking statements herein reflect the Company's expectations as at the date of this press release and are subject to change after this date. The Company does not undertake to update publicly or to revise any written or oral forward-looking information or statements whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement.

The Company's audited consolidated financial statements for the year ended December 31, 2021, together with its MD&A for the corresponding period, can be accessed on the Company's website at www.snclavalin.com and on www.sedar.com.

SOURCE SNC-Lavalin

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