AtkinsRéalis Group Inc.

Thank you for standing by. This is the conference operator. Good morning and welcome to SNC-Lavalin's third quarter 2021 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 zero. I would now like to turn the conference over to Denis Jesmin, Vice President, Investor Relations. Please go ahead.

Thank you, Ariel. Good morning, everyone, and thank you for joining the call. Our Q3 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 its transcript 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. 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 company's relevant filings on CDAR. These documents are also available on our website. Also during the call, we may refer to certain non-RFRS measures. These measures are defined and reconciled with comparable RFRS measures in our MD&A, which can be found on CDAR and on our website. Management believes that these non-RFRS measures provide additional insight into the company's financial results, and certain investors may use this information to evaluate the company's performance from period to period. And now I'll pass the call over to Yann Edwards. Yann?

Thank you, Denis, and good morning, everyone. Starting on slide four, SNCL Engineering Services delivered another sturdy performance with good segment adjusted EBIT growth and sound results across all three segments. With one quarter to go, we remain on track to achieve our 2021 outlook. The wind down of our LSTK projects continues to advance with significant reductions in backlog and continued constructive discussions with our clients on recoveries for the additional costs related to COVID-19 impacts. Additionally, we closed the sale of the oil and gas business, an important strategic milestone for the company. Portally performance was driven primarily by engineering services, which generated revenues of $1.5 billion, an increase of 2.2% over Q3 last year. Excluding the impacts of foreign currency, we saw strong organic growth of 4.2%. Segment-adjusted EBIT margin of 9.8% was consistent with the prior year. Bookings were strong for the quarter, with a book-to-bill ratio of essentially 1, with backlog growing to $11.1 billion, up 3.7% over the prior year. SNCL Projects, the LSTK contract's backlog, was reduced by approximately $240 million, bringing the remaining backlog down to just over a billion. In summary, we've delivered another solid quarter, demonstrating that the execution of our strategic initiatives to transform this company are generating results. We remain on our journey to transform and align SNC-Lavalin through three fundamental growth megatrends, addressing climate change, government's infrastructure development programs, and driving digital innovation. In all of these areas, we have distinct capabilities and a compelling value proposition. Now let me review our three pillars of success on slide five. These were disclosed during our investor day last month. And first is where we play. We are positioned with a leading presence across Canada, the US and the UK with targeted operations in other key geographies. We have seven specific end markets deliberately focused on infrastructure where governments are investing heavily to achieve net zero. Second is how we win. We are focused on deploying our global capabilities locally to our clients. leveraging our end-to-end services and engineering net zero expertise winning market share and growing relationships with our clients as an integrated partner the combination of operating in these strategically selected markets with this focused approach drives how we will grow and create long-term value we will continue to leverage our capabilities across our markets to deliver high-quality services while investing in both organic and inorganic opportunities. Turning to slide six, I'd like to talk to you about a critical element for our success, and that is our people. The growth we envisage will only be realized through the hard work of our teams of talented people with the drive and skills to recognize our vision. We're laser-focused on attracting, retaining, and developing the people we need to grow the organization. This broad-based effort is characterized in three themes to provide an inspiring set of professional development opportunities to retain our employees and attract new talent to ensure our success. The first theme is the strength of our data and technology capability to meet the demands of the future which include our Advanced Engineering Global Technology Center in India, which continues to grow, now with more than 2,000 employees, all supporting the organization by providing a source of highly technical professionals. The advancement of world-class technical, digital, and professional training programs for our people, through which we have trained approximately 10,000 people to date. The next talent theme is the development of our people. The talent management process continues to evolve and supports in-depth succession and career path planning. In collaboration with Oxford Sayet Business School, we have developed our signature leadership development program. Our business is global, and talent deployment and career development is encouraged through our mobility program. We also remain focused on employee satisfaction as a tool to reduce turnover. We've conducted a number of measures, including regular surveys, to understand and listen to the needs of our employees so that we can implement improvements to address what we hear. Our most recent feedback tells us that 88% of our employees are proud to work at S&C Laughlin and 85% would recommend the company as an employer, both of which we believe to be industry-leading figures. The final theme is to build talent to provide the capacity for growth. This is by injecting the organization with youth. And so far this year, we've onboarded approximately 750 new hires through our graduate and apprentice development programs, an important source of talent to complement our more senior engineers. And perhaps most importantly, diversity is embedded in our culture and we're working to leverage that through strong ED&I programs to meet our gender diversity targets. Next, I'd like to move to the business lines and start with slide seven and the results for EDPM. EDPM generated revenues of $917 million up 2% compared to the same quarter last year, but 4.1% on a constant currency basis. This increase was primarily driven by strong performance in the UK transportation, water, and defence markets. Segment-adjusted EBIT of $86 million increased 6.6%, resulting in a 9.4% EBIT margin, approximately 40 basis points above the prior year. Our backlog grew a strong 15.3% to $3.2 billion, a new record high for eDPM, driven by major wins across all core geographies in Canada, the UK, and the US. We also could continue to leverage our digital expertise, fortifying our capabilities in digital transformation and enabler for all we do. This further demonstrates differentiation in our core service offerings through increased focus on design transformation, program management, and digital twinning. We are focused to provide the engineering expertise required to evolve the world towards a globally connected and data-driven operating system for the built environment. Our recent digital twin project wins in the UK validate this part of our strategy. Our reimbursable contract model, as well as our strategic shift to contracting models to collaborate on a risk-balanced approach, are providing benefits in a period of disruption and potentially inflation in wage rates, allowing us to work with our customers on the best outcomes for all. Looking ahead, our pipeline of opportunities remains strong, and our strengthened backlog provides good visibility in supporting our positive outlook for the balance of the year, as well as for the longer-term financial targets. On slide eight, two recent wins illustrate and demonstrate our leadership in applied sustainability and delivering low-carbon outcomes on both retrofit and new-build bases. SNC-11 has been a pioneer in engineering net zero. The adoption of dedicated government and private sector initiatives to address climate change opens a substantial opportunity to utilize our expertise and again, to gain market share. An example of our global leadership is a flagship project win we recently received to design and manage the delivery of net zero retrofit for almost 4 million square feet of UK government office space. And we're really pleased to partner with the government to decarbonize this entire estate. I'd also point out this was a recent award and the value has not yet been added to our backlog. The second project we would like to discuss is a new build program for the design and ongoing maintenance of a pioneering net zero emissions power plant. This is a one-of-a-kind design, which will eliminate all air emissions, including traditional pollutants and CO2 emissions. In response to climate change, governments around the world are accelerating their pursuit of reduced carbon footprints through regulation, incentives and investment. We maintain a leadership position with our Engineering Net Zero initiative, providing clean and affordable solutions to our clients in engineering a sustainable society. We see significant opportunity for S&C Lavalin in the months and years ahead with the governments in our geographies whose focus is on infrastructure spending. These remarkable projects demonstrate that S&C Loveland is at the forefront of carbon neutral design and delivery. Turn into slide nine, and our nuclear segment continues revenues decreased by 2.1% on a reported basis, and we're in line on a constant currency basis. The decrease was as a result of a strengthening of the Canadian dollar versus the US dollar. Lower volumes in Asia, lower volumes of activity on refurbishment projects in Canada. This was partially offset by higher volume in Europe where we continue to work on the Hinkley Point C power station in the UK. Segmented adjusted EBIT of $36 million was essentially flat with prior year with EBIT margin boasting approximately 20 basis point improvement above our target range. We remain encouraged by the significant opportunities ahead as our team continues to pursue a number of development prospects, particularly in deconditioning and waste management in the US. In the near term, we're seeing strong activity in engineering and field services with general market conditions positive due to government support for carbon net zero. Decisions are expected soon on several US DOE environmental management programs, and we see continued positive momentum in the UK. Longer term, we believe nuclear will be a beneficiary of the stimulus funds in the US, the UK, and Canada. Our proprietary portfolio of software and licensing rights for the nuclear reactor designs and operational support licenses is a key element to our continued success. Along with waste management reduction and process technologies, our capabilities are differentiated, and in many cases, unique, enabling us to secure contracts. Moving to slide 10 on infrastructure services, the segment had a solid quarter with revenues of $343 million representing growth of 5.9% compared to Q3 2020. On a constant currency basis, revenue increased by 7.6%, driven by increased levels of activity in hydro power and links on where backlog totaled over $1 billion due to new orders in the US and a demand for grid modernization and support growth in renewable energy and electrification. Segment-adjusted EBIT of $23 million was slightly lower and reduced each EBIT margin of 6.6%, resulting primarily from higher procurement costs on several projects. We see opportunities in renewables such as wind, solar, and hydro, as well as data centers, rail and transit, and social infrastructures in the Americas and Europe that cause us to remain excited about the numerous opportunities ahead. Turn into slide 11 and capital. The segment continues to be impacted by persistently lower levels of traffic on Highway 407. As we continue to experience the effects of COVID-19 disruptions. The increased COVID-19 vaccination rates in the third quarter allowed the province of Ontario to enter step three of the reopening and non essential businesses. Outdoor activities and public spaces and which resulted in an increase in 24% in traffic levels compared to Q3 2020. We therefore remain cautiously optimistic that we will see increasing revenues over the short to medium term as life gradually returns to more normal patterns. Our other concessions continue to perform well. And looking ahead, we're building a pipeline of new public-private partnership opportunities to leverage our engineering and O&M capabilities, including several PPPs in Canada and the UK, as well as in the wastewater treatment and hospital spaces. Moving to slide 12 and the infrastructure EPC projects, we continue to substantially work down the LSTK construction backlog to $1.1 billion, or 42% of the year-ago level of $1.9 billion. Like many other companies in our industry, we continue to navigate the headwinds in relation to the COVID-19 pandemic and increasing pressures from the ripple effects of labour shortages, inflation and supply chain disruption all add to these challenges. Our team is effectively managing these issues across the organisation and we're tracking the impacts closely and continue to have discussions with our customers regarding recoveries. Turn into slide 13 on the resources segment. We completed the sale of our oil and gas business during the third quarter. Jeff will walk you through the numbers on that shortly. Our mining services business continues to perform well and saw a strong increase in revenue and prospects driven by increased emphasis on sustainability and the demand for materials needed for electrification. With that, I'll now turn the call over to Jeff.