AtkinsRéalis Group Inc.

Good morning and welcome to SMC Lavalin's first quarter 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Denis Jasmine, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for turning the call. These are very difficult and uncertain times for all of us, and I very much hope that you and your family are safe and well. I do appreciate you taking the time to listen in today. Our Q1 earnings announcement was released this morning, and we have posted a corresponding slide presentation on the Investors section of our website. The recording of today's call and webcast will also be available on our website within 24 hours. With me today are Ian Edwards, President and Chief Executive Officer, and Jeff Bell, Executive Vice President and Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to one or two questions to ensure that all analysts have an opportunity to participate. You are welcome to return to the queue for any follow-up questions. I would like to draw your attention to slide two. Comments made on today's call may contain forward-looking information. This information, by its nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the companies that have been filing on CDAR. These documents are also available on our website. And now I'll pass the call over to Yannick Lourdes.

Yannick? Thanks, Vinnie. Thank you all for joining us and I hope you're all managing well through the current situation and working safely. Please turn to slide four. Before we walk through the first quarter, I want to make two points considering the unprecedented nature of the current situation and the company's evolution over the course of the last year. Firstly, the pandemic. We have moved quickly to safeguard our people, business and financial flexibility. Secondly, Solid results today for Q1 that demonstrate that our new strategic direction is proving effective even in the current backdrop. The reshaping of our organization remains on track. We have a diversified business across engineering services in essential sectors such as infrastructure, transport, and nuclear with key skills that are in demand. Most of all, our employees have shared the same mindset and approach. I'd like to thank all our employees for this and their continued resilience and the innovation shown on a daily basis. I'm very proud to lead this organisation. If you would turn to slide five, I'd like to outline the COVID-19 impacts on our business and the actions taken. Our number one priority remains the health and wellbeing of all our employees. In the main, our physical projects are deemed essential services, so our infrastructure services operations and maintenance, and nuclear work continues. Our real estate projects continue with a couple of exceptions. More than 30,000 people in our professional services moved to fully working remotely very quickly, and we've retained all our capabilities. In a very short space of time, we've moved from dealing with the immediate effects of safety and business resilience factors to being able to offer innovative and value expertise directly to government in tackling COVID-19. We've won contracts to support governments managing projects related to COVID-19 and we're using logistics field and project management expertise to help deliver responsive health facilities in both Canada and the UK. We were a first mover in taking actions to secure our financial standing. Our liquidity remains strong, and we believe we have financial flexibility to deal with the impacts of COVID-19. With our role at the economy restarts already beginning, we will be at the forefront of this alongside our government clients. Infrastructure planning and engineering will be key to stimulating economies and adjusting to new ways of living. and we have key capabilities here. I'll walk you through how this looks for each sector in more detail. But first, if you turn to slide six, we delivered a solid Q1. Revenue is up for engineering services, excluding capital. This business remains the future of the organization and continues to deliver a strong EBIT. The project's backlog is progressing well, and it's reassuring that the infrastructure EPC contributed a small segment EBIT, and resources projects are now only 10% of the LSTK backlog left. Crucially, we enter Q2 with a strong financial position. I'll let Jeff talk in more detail later on the full Q1 and our liquidity and financial flexibility. I'll now talk about each part of the business, starting with EVPM on slide 7. In Q1... the core EDPM business in the UK, the US and Canada continued to perform well. We did experience impacts in Asia Pacific and the Middle East as COVID hit these regions earlier. Business winning in Q1 remained active with a number of transportation and infrastructure wins across the world. As a key part of our future growth in engineering services, EDPM is driving our digital future strategy. Across the organisation, our investment in digital technologies and ways of working has proven valuable through the current situation, and the insights we can provide clients by harnessing data will form the next generation of our projects. If you turn, please, to slide 8, for EDPM in Q2, remote working was swift and included nearly all employees, so our productivity rates although we do expect to see revenue reducing Q2 due to the current uncertainties. We're actively supporting governments in our core geographies, and we are winning business in every region. Our government and client relationships are key as COVID-19 restrictions are gradually lifted, and we are ready and will be there to support governments as crucial projects and infrastructure are put in place to ensure a positive recovery. Nothing changes in our strategy for eDPM. Our focus is on having our capabilities active now and ready to grow as the recovery starts. We are seeing many opportunities for expansion in core services, including cyber security, defense, innovative housing solutions across the regions. On slide nine, we'll look at nuclear. This is a great business and our position is enviable. In nuclear, we have a strong global position, and our work here proves to be resilient. In Q1, we won a number of diversified contracts across decommissioning, cleanup, and a framework agreement to support an existing nuclear fleet. We are focused on partnerships and being a leader in technology for our clients, alongside enhancing our own operational excellence to ensure we grow and build on a strong market position. Let's go to slide 10, and I'll talk more on opportunities in COVID. Nuclear has generally been deemed an essential service in our key geographies. And while there is some natural slowdown with COVID, the demand for nuclear services remains strong. Already in Q2, we have delivered the Darlington Unit 2 refurbishment, and this is part of our refurbishment work running through to 2026. We have a number of new opportunities across our diversified nuclear business. And in our core geographies of the US, the UK, and Canada, we are seeing multiple small-medium reactor projects requiring ongoing support. Our nuclear business is resilient, continues to deliver, and is positioned for growth. Please turn to slide 11. Infrastructure services. continues to be successful and gives us an important presence in the North American infrastructure and transportation markets. Such services in these markets are key to the ongoing transformation of our company, and the contracts in this area can often run for multiple decades as we operate and maintain facilities. Additionally, our infrastructure services business has a number of differentiated offerings in niche markets around the world, Linkzone has expanded in geographic reach and our leading district cooling business alongside facility and program management services continues to grow organically in the MENA region. We are developing our project integrator model and this is where we will take our major project expertise and bring them to our clients as an integrated project and portfolio management service. Moving to slide 12 and how we're able to react quickly to the current climate with infrastructure services. Our infrastructure services business has already seen new business in directly supporting the efforts to tackle COVID-19. We have a JV that is providing mobile health facilities to the Canadian government, and we are working in the pharmaceutical space to adjust production facilities towards testing kits. As with our nuclear business, The physical sites that we provide services on are primarily deemed essential. We are continuing our provision of services to hospitals, transit, power plants, defense, and civil administration. Lynxon has seen delays in contracts awards. However, we expect demand for power distribution to remain strong. This is simply a matter of timing. This is also the case for those projects where we're providing services to civil construction projects. We are standing with governments and across Canada and globally. We will be a champion of infrastructure, contributing our project integrator, project management, engineering services, and helping shape the social and transportation infrastructure solutions for the recovery. Finally, in engineering services on slide 13, we have capital. So first off, the temporary dip in 407 traffic has some fairly obvious impacts on both 407 dividend and the contingent sales fund. On our other concessions, we are not seeing a similar impact, with the different contract types based on availability rather than end-user demand. Our expertise in capital and the finance and structure of major projects remains of value, particularly as governments may look to quickly finance and push through large projects in the recovery. So let's look at slide 14 and the infrastructure LSTK projects. The controlled management of the infrastructure projects continues to progress well. And as noted earlier, these actually contributed a small positive EBIT in the quarter. Most of these projects continued, and where projects experienced temporary suspensions, we've worked with our clients to minimize cost of both demobilizing and returning to work safely. It's worth also noting that on the REM projects, engineering and planning work continued. In relation to COVID-19, we are well protected by contract clauses such as change of law and force majeure. And while there are obviously slower rates of progress on these projects, that remain open. We currently have not foreseen forecast completion dates move significantly, and we continue to assess these with our clients. On slide 15, we will take a look at resources. We are now down to 300 million of backlog remaining for LSTKs in resources, and these projects are largely scheduled to complete this year. A swift action in the restructuring was to initiate withdrawal from the Valeris business, and we successfully completed that closure within Q1. Services within resources are under pressure, and we are taking further actions to reduce costs. Please turn to slide 16. So as you've seen, the backlog of LSTK projects has been reduced by 20% this time last year. and we have additional project control measures in place which further de-risk the remaining backlog. Of the remaining 2.9 billion, only 300 million remains in resources, and the majority of the infrastructure projects relate to light rail transit systems. If we move to slide 17, then we can see the phase-out of these projects. From July 19 to the end of March 2020, we progressed half a billion of LSTK backlog. The resources element is now a minimal portion and we're working with all our clients to maintain good visibility of the phasing out of each project. Nigel White's team remains very active in all these projects and he's working closely with sector presidents and the project teams directly in ensuring tight management of schedule and delivery. Please turn to slide 18. The company is well positioned. We have moved rapidly to protect our employees, our business, and we have financial flexibility. We're able to maintain our services capability through this period, and we're already seeing new demand for our expertise as governments and clients address the pandemic itself and transition to the phase beyond. Our strategic direction remains on track and unchanged, and today's Solid Q1 demonstrates our continued progress down this path. The fact that we have already been tested over the past year has played to our favour, as we have been able to demonstrate our ability to be agile and responsive in changing circumstances. I'd like again to thank our employees for their resilience, collaboration and positivity through this time. I'll now pass to Jeff, for more detail on the Q1 financials. Thank you.