Seacliff Construction Corp.

Seacliff Construction Corp.

November 09, 2009 17:35 ET

Seacliff Reports Solid Year-to-Date Results and Confirms Quarterly Dividend

Nine-Month Revenue, Gross Profit, EBITDA and Adjusted Net Income Up Over Same Period Last Year

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 9, 2009) -

Seacliff Construction Corp. (TSX:SDC) will hold a conference call and webcast to discuss 2009 third quarter and year-to-date financial results and corporate developments on November 10, 2009 at 8:00 am Pacific Time (11:00 am Eastern Time).

To participate, please dial 1-800-766-6630 (toll free) or 416-695-6622 (GTA and international) approximately five minutes before the call. A replay will be available through November 24, 2009 at 1-800-408-3053 (toll free) or 416-695-5800 (GTA and international) passcode: 1337106 In addition, a live and archived webcast, as well as an mp3 download, can be accessed at: or on Seacliff's website at

Seacliff Construction Corp. ("Seacliff" or "the Corporation"), one of the largest and most diversified construction companies in Western Canada, today reported its financial results for the three and nine months ended September 30, 2009. Copies of the management's discussion and analysis, and the unaudited interim financial statements will be available at and on Seacliff's website at on or before November 10, 2009.

Seacliff conducts its operations through two business units - Dominion Construction (or "Dominion"), a general contractor, and Canem Systems (or "Canem"), which designs, builds, maintains and services electrical and data communication systems.

"We are pleased with the solid performance Seacliff has achieved for the third quarter and year-to-date, despite very challenging market conditions," said Bill Crarer, Seacliff's CEO. "The significant projects we've undertaken since the beginning of the year, including Dominion's work at the Broadway Tech Centre and BC Place Stadium in Vancouver, and the International House at the University of Calgary, as well as Canem's work at PLC East Wing at the University of Alberta, the Taylor Family Digital Library at the University of Calgary and the University of Calgary Veterinary Medicine Clinical Skills Building, have also helped push our nine-month revenue, gross profit and EBITDA up year-over-year. During the third quarter, both business units continued to secure additional work across all of their established markets, signing a total of $119.4 million in new contracts," Crarer added.


(unaudited) Three months ended Nine months ended
September 30 September 30
(Expressed in $ 2009 2008 2009 2008
thousands, except per
share amounts)
Consolidated revenue 147,033 142,753 424,536 366,460
Gross profit 18,972 18,878 54,926 46,577
EBITDA(1) 9,282 10,992 26,185 25,701
EBITDA Margin 6.3% 7.7% 6.2% 7.0%
Adjusted net income(1) 6,123 7,434 17,231 17,328
Net income 4,166 5,353 11,360 13,857

Adjusted net income per share (1)
Basic ($ per share) 0.30 0.35 0.84 0.93
Diluted ($ per share) 0.29 0.34 0.83 0.90
Net income per share
Basic ($ per share) 0.20 0.26 0.55 0.74
Diluted ($ per share) 0.20 0.25 0.54 0.72

Dividend payable per share 0.05 - 0.15 -

As at As at
September December
30, 2009 31, 2008
Cash and cash equivalents 97,808 114,164
Marketable securities 18,995 -
Total current assets 255,995 231,818
Total assets 273,923 240,971
Total current liabilities 157,073 140,132
Shareholders' equity 114,973 99,753

Working capital (1) 98,922 91,686
Total Work on Hand (1) 535,000 647,000

(1) These items are non-GAAP measures. Refer to Seacliff's MD&A for the
three and nine months ended September 30, 2009.

Reconciliation of adjusted net income to net income

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
Adjusted net income 6,123 7,434 17,231 17,328
Non-cash stock compensation
expense resulting from
the IPO corporate reorganization.
Refer to Note 8b in the
consolidated interim financial
statements for the nine months
ended September 30, 2009. (1,957) (2,081) (5,871) (3,471)

Net income 4,166 5,353 11,360 13,857

Third Quarter and Nine Month 2009 Highlights

- Consolidated revenue grew by $4.2 million, or 2.9%, in the third quarter and by $58.0 million, or 15.8%, in the first nine months

- Gross profit increased by $0.1 million, or 0.5%, in the third quarter and by $8.3 million, or 17.8%, for the first nine months

- Third quarter EBITDA decreased by $1.7 million, or 15.5%, to $9.3 million, and grew by $0.5 million, or 1.9%, to $26.2 million for the year to date

- Adjusted net income fell by $1.3 million, or 17.6%, in the third quarter and decreased by $0.1 million, or 0.6%, in the first nine months. Basic adjusted net income per share was $0.30 for the quarter and $0.84 for the first nine months

- As at September 30, 2009, cash and cash equivalents totaled $97.8 million and working capital totaled $98.9 million. In addition, the company held $19.0 million in government debentures and other guaranteed investments. As a result, Seacliff remains well positioned to pursue large-scale projects and suitable acquisition targets

- Seacliff secured approximately $119.4 million worth of new work during the third quarter. Of that, $53.4 million is for the institutional sector

- Total Work on Hand was $535 million at quarter end, compared to $647 million at December 31, 2008. Approximately $374 million, or 70%, of the total is for the institutional sector

- On August 7, 2009, Seacliff's Board of Directors approved a Deferred Share Unit Plan which allows directors to receive all, or a portion of their annual compensation in the form of Deferred Share Units (DSUs). The purpose of this plan is to provide directors of the Corporation with compensation opportunities which are compatible with shareholder interests.

Subsequent Events

- On October 1, 2009, Dominion Construction, Seacliff's construction contracting division, was named "General Contractor of the Year" at the Vancouver Regional Construction Association's annual awards dinner. In addition, Dominion won the "Gold Award - General Contractor Project over $50 million" for its work on the Richmond Olympic Oval and the "Silver Award - General Contractor Project $20 - $50 million" for the renovation and seismic upgrade to Vancouver Technical School

- On November 6, 2009, Seacliff's Board of Directors declared a dividend (for Q3 2009) of $0.05 per share, payable on December 31, 2009 to shareholders of record on December 15, 2009. Valued at approximately $1.1 million, these dividends will be eligible for Canadian tax purposes


Moving forward, Seacliff's outlook is cautiously optimistic. Both Dominion and Canem operated at a high level of activity for the first three quarters of 2009 and will remain busy for the balance of the year. In addition, with an overall success rate of 42% on its project bids, Seacliff continued to win new work throughout the quarter.

"We are very pleased with our team's ongoing ability to consistently sign new contracts," said Mr. Crarer. "However, our total Work on Hand has fallen since this time last year, due in part to schedule delays on government-funded stimulus work. To offset this, we have successfully focused on winning many smaller, short-term projects, which have a more immediate impact on our revenue and EBITDA performance."

Mr. Crarer also stated that Dominion was awarded two sizable institutional contracts in October, subsequent to the end of the third quarter. These comprise a $17 million dollar contract for the new Mount Royal Parkade in Calgary and a $19 million contract to construct an elementary school in Saskatchewan.

As Seacliff has previously reported, the recent tightening of credit markets, and subsequent slowdown in the initiation of new construction projects, has led to increased competition. Accordingly, Dominion and Canem are leveraging their depth of experience and proven flexibility to capitalize on all available opportunities.

Dominion, for example, is targeting one P3 project in Alberta and another two in Northwestern Ontario, where the company is one of just three organizations shortlisted. At Canem, new bids include a recently finalized P3 proposal for a $500 million RCMP facility in Surrey, B.C., a bid for a major electrical contract at the Southern Alberta Institute of Technology (SAIT) in Calgary, and two separate phases of work at the Edmonton International Airport. In addition, Canem continues to target complex, multi-location projects with both national and regional accounts, and has just recently completed a major retrofit for Canadian Tire.

Seacliff is also leveraging the significant diversity it has achieved, both geographically and by industry sector. In Saskatchewan, for example, tough market conditions during the past nine months led to a 30% year-over-year decrease in that region's contribution to the Corporation's consolidated revenue. This was largely offset by a 30% gain in British Columbia, where Seacliff has benefited from a relatively stable construction market.

At the same time, Dominion and Canem continue to aggressively pursue a broad range of other projects throughout Seacliff's established geographic markets and to capitalize on early signs of market recovery within the commercial and light industrial sectors. As a result, Seacliff is targeting multiple new construction opportunities with a total value approximating $6 billion.

Going forward, the identification and pursuit of suitable acquisitions that will further enhance Seacliff's diversification and bring increased opportunities remains a top priority. With over $117 million in cash and marketable securities on hand at the end of the third quarter, and no debt on its balance sheet, the Corporation has the resources to execute on its growth plans.

As previously reported, Seacliff's acquisition strategy gives consideration to purchasing construction-related businesses outside its current sphere of operation. These would be of similar skill set, enabling the Corporation to further capitalize on the many opportunities emerging in the Canadian infrastructure sector.

Moving forward, Seacliff will continue to focus on managing risk through established strategies, which include:

- Maintaining close ties with customers, and using only select sub-trades and suppliers to ensure projects are delivered efficiently and in a cost-effective manner

- Preserving working capital, strengthening business relationships and collecting accounts receivable in a timely fashion

- Maintaining a competitive position in the marketplace through innovative cost solutions while preserving targeted levels of profitability

In conclusion, while many of the larger projects currently targeted have long lead times, Seacliff continues to see them as significant opportunities and intends to leverage its proven strengths in their pursuit. At the same time, the Corporation will continue to execute its established growth strategies.

At Dominion, this means working to increase its penetration of the institutional sector, strengthen its presence on government-sponsored civil sector projects and augment its capacity to acquire new work. Facilitating this drive, the company added a number of new estimators to its business development team during the third quarter, including a chief estimator in Calgary and a new senior estimator in Edmonton.

At the same time, Canem will continue to target large, complex electrical projects, while maintaining its aggressive pursuit of recurring revenue activities within its service and special projects departments.

These initiatives are expected to leave Seacliff well-positioned to benefit from today's current and emerging market opportunities, while enabling the Corporation to continue generating good results in the coming quarters.

About Seacliff Construction Corp.

Seacliff is one of the largest and most diversified construction companies in Western Canada. It provides general contracting construction services and electrical contracting services to a wide array of clients in both the public and private sectors. The majority of Seacliff's business is derived from institutional, commercial and light industrial construction projects. It operates primarily in Western Canada, with 15 locations in British Columbia, Alberta, Saskatchewan and Manitoba, as well as one location in Northwestern Ontario. With headquarters in Vancouver, B.C., Seacliff's business is conducted through two business units: Dominion Construction, a general contractor; and Canem Systems, an electrical contractor.

As a general contractor, Dominion offers diversified general contracting, construction management and design-build services in Western Canada primarily to institutional, commercial and light industrial clients. Dominion's services include preconstruction planning and comprehensive project management services. These services include the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project. Dominion subcontracts out the vast majority of trade work on its projects; however, some construction services, including site work, concrete forming and placement, are self-performed.

Canem provides a broad range of services including designing, building, maintaining and servicing electrical and data communication systems for institutional, commercial, light industrial and multi-family residential customers. Canem's electrical contracting services include: designing electrical distribution systems within a building or complex; procuring and installing electrical equipment and materials; on-call service for electrical maintenance and troubleshooting; preventative and scheduled maintenance for critical component installations; budgeting and pre-construction services; and management of regional and national contracts for multi-site installations. Substantially all of Canem's work is self-performed.


Forward-Looking Statements

This press release contains statements concerning Seacliff's services, use of funds, business plan, and objectives. Seacliff's Total Work on Hand, other expectations, plans, goals, objectives, assumptions, information or statements about future events or conditions may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Assumptions have been made regarding, among other things, the successful implementation of Seacliff's business plan, the availability to Seacliff of qualified personnel, the continuation and completion of the projects forming Seacliff's Total Work on Hand, and general economic, business and market conditions. Although Seacliff believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Seacliff can give no assurance that such expectations will prove to be correct. The forward-looking statements are based on the Corporation's current expectations, estimates and projections, and are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, among others, Seacliff's ability to be retained for existing and new project work by existing and new clients, Seacliff's ability to retain and hire the qualified personnel required, the delay or cancellation of projects forming Seacliff's Total Work on Hand, general economic, business and market conditions, and other risks as are detailed from time to time in the continuous disclosure filings of Seacliff. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. These forward-looking statements are made as of the date of this press release, and Seacliff assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable laws.

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