Seacliff Construction Corp.
TSX : SDC

Seacliff Construction Corp.

May 13, 2008 16:00 ET

Seacliff Reports First Quarter 2008 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 13, 2008) - Seacliff Construction Corp. ("Seacliff") (TSX:SDC), which completed an initial public offering ("IPO") on April 24, 2008, today reported carved out financial results for the three months ended March 31, 2008. Gross margin improvements, a focus on higher margin contracts and the implementation of best practices at the company's two operating divisions (The Dominion Company Inc., or "Dominion", and Canem Holdings Ltd., or "Canem") contributed to a strong performance, with first quarter net income growing 57% and EBITDA rising 53% over the same period of 2007. Dominion, a general contractor, and Canem, which designs, builds, maintains and services electrical and data communication systems, also continued to benefit from strong economic conditions across all four western provinces. Strong growth in the Saskatchewan market, which Dominion participates in, accounted for $31 million, or 31.8%, of total revenue for the quarter. This is up from $22 million for the same period last year.

"We are pleased with these first quarter financial results and especially with the ongoing margin improvements," said Bill Crarer, Seacliff's Chief Executive Officer. "During the past year, Dominion and Canem have implemented numerous internal strategies designed to boost profitability. Their first quarter performance provides solid evidence that these initiatives are gaining traction."

On April 24, 2008, Seacliff completed an IPO of 7,692,308 common shares at a price of $13.00 per common share for total proceeds of approximately $100 million. Subsequently, it acquired, indirectly, a 100% interest in Dominion and Canem, the two subsidiaries of Seacliff Holdings Ltd. ("SHL"). The financial results reported today have been prepared on a consolidated carved out basis from the financial statements of SHL in accordance with Canadian generally accepted accounting principles. These carved out consolidated financial statements will not reflect Seacliff's results of operations and financial position for future periods, nor do they necessarily reflect the results of operations, financial position and cash flows that would have been realized had Seacliff been a stand-alone entity during the periods presented.

The construction industry in Canada is seasonal in nature resulting in less outdoor work being performed in the winter and early spring months. Accordingly, Dominion and Canem typically experience lower construction activity in the first and fourth quarters, as compared to the second and third quarters of the year.



Financial Highlights

(unaudited) Three months ended
(in thousands) March 31, 2008 March 31, 2007
----------------------------------

Construction contract revenue $ 97,410 $ 95,630
Gross profit 11,763 9,364
Net income 4,660 2,954
EBITDA 7,384 4,816


- Gross profit increased by 26% to $11.8 million, up from $9.4 million in the first quarter of 2007

- First quarter EBITDA increased by 53% to $7.4 million, compared to $4.8 million in 2007

- Dominion awarded contract to undertake preconstruction services for Phase I improvements to BC Place in Vancouver, BC

- Canem awarded $25 million contract for the electrical component of a commercial project in Calgary, AB

- Dominion awarded $35 million contract for the construction of a commercial project in Vancouver, BC

- Total Work on Hand was $622 million at quarter end, up from $490 million at March 31, 2007 and $618 million at December 31, 2007

- Subsequent to March 31, 2008, among other projects won, Dominion was awarded a $30 million contract for the construction of an institutional project in southern Manitoba

Overall Performance

For the three months ended March 31, 2008, net income rose by 57% to $4.7 million, up from $3.0 million for the same period last year. The growth was primarily related to gross margin improvements at both Dominion and Canem, which also contributed to a 53% increase in first quarter EBITDA.

First quarter construction contract revenue was $97.4 million, compared to $95.6 million for the same period in 2007. Strong growth in the Saskatchewan market accounted for $31 million, or 31.8%, of total revenue for the quarter. This is up from $22 million for the same period last year. Revenue was negatively impacted by colder winter weather in the Prairie provinces, which reduced the number of workable days in the first quarter of 2008 as compared to the same period last year.

First quarter gross profit was $11.8 million. This represents a 26% increase over the same period in 2007, when gross profit totaled $9.4 million. The profit improvement was primarily the result of a sharpened focus on securing higher margin contracts, as well the implementation of best practices and training programs that improved project execution. Rental income was $1.2 million compared to $1.1 million for the first three months of 2007.

General and administrative expenses during the first quarter were $5.8 million, consistent with general and administrative expenses of $5.7 million for the three months ended March 31, 2007.

First quarter EBITDA totaled $7.4 million, up from $4.8 million for the same period in 2007. EBITDA margin also increased, rising to 7.6% from 5.0% in 2007. On a divisional basis, Dominion's EBITDA for the first quarter of 2008 increased by 77% to $3.2 million, compared to $1.8 million for the first quarter of 2007, and Canem's first quarter EBITDA increased by 39% to $4.2 million, compared to $3.0 million in 2007.

Total Work on Hand

As at March 31, 2008, Total Work on Hand was approximately $622 million. This comprised approximately $457 million of Backlog and approximately $165 million of Agency Projects. Projects awarded in the first quarter of 2008 included the preconstruction services for Phase I improvements to BC Place in Vancouver, BC and a $35 million contract for the construction of a commercial project in Vancouver, BC.

Subsequent to March 31, 2008, among other projects won, Dominion was awarded a $30 million contract for the construction of an institutional project in southern Manitoba. This project is expected to commence in July 2008 and be completed by October 2009.

Outlook

The outlook for Seacliff is positive. In 2003, close to 59% of Canada's infrastructure was estimated to be over 40 years old. As a result, Canada's current infrastructure deficit is estimated to be $123 billion, with the four western provinces all announcing significant infrastructure spending commitments. In addition, the economy in the western provinces is exceptionally strong and is expected to lead the nation in economic growth for the foreseeable future.

The emergence of large construction projects and public-private partnership or "P3" projects is also creating new opportunities for construction companies like Seacliff that have a proven track record and the financial resources to participate. As one of Western Canada's largest and most diversified construction companies, Seacliff is well-positioned to benefit from increasing market demand for construction services, and further strengthen its market presence and expand its client base.

Selected Financial Information

The following table summarizes key financial data, which was derived from and should be read in conjunction with, the unaudited interim carved out consolidated financial statements of SHL for the first quarter ended March 31, 2008 and the annual audited carved out consolidated financial statements of SHL for the fiscal year ended December 31, 2007.



Three months ended
(in thousands) March 31, 2008 March 31, 2007

Income Statement Data
Construction contract revenue $ 97,410 $ 95,630
Gross profit 11,763 9,364
Net revenue 13,546 10,880
Income before income tax 7,055 4,491
Net income 4,660 2,954
EBITDA 7,384 4,816

As at As at
March 31, 2008 December 31, 2007
Balance Sheet Data
Total current assets $139,499 $150,142
Total assets 146,004 157,136
Total current liabilities 119,908 135,807
Equity in net assets 21,322 15,622

Three months ended
March 31, 2008 March 31, 2007
EBITDA Reconciliation
Net income $ 4,660 $ 2,954
Interest income (251) (446)
Interest expense 7 27
Interest, holdback receivable
and payable (178) -
Depreciation and amortization 424 389
Income taxes 2,395 1,537
Non-controlling interest 291 230
Stock based compensation 36 125
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EBITDA $ 7,384 $ 4,816
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Segmented Data
Construction contract revenue
Dominion $ 69,530 $ 70,695
Canem 27,880 24,935
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Total construction contract revenue $ 97,410 $ 95,630
-------- --------
-------- --------

EBITDA
Dominion $ 3,205 $ 1,814
Canem 4,179 3,002
-------- --------
Total EBITDA $ 7,384 $ 4,816
-------- --------
-------- --------

EBITDA Margin 7.6% 5.0%


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, with a majority of its business derived from institutional, commercial and light industrial construction projects. Seacliff is headquartered in Vancouver, B.C. and operates 16 locations in British Columbia, Alberta, Saskatchewan and Manitoba, as well as one location in Northwestern Ontario. 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, including the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project.

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 preconstruction services; and management of regional and national contracts for multi-site installations.

Advisories

Final Prospectus and First Quarter Fiscal 2008 Financial Statements and MD&A

On April 21, 2008, Seacliff filed a final prospectus in relation to its recent public offering. On May 13, 2008, it also filed first quarter fiscal 2008 financial statements and a management's discussion and analysis ("MD&A") which were prepared on a consolidated carved out basis from the financial statements of Seacliff Holdings Ltd. ("SHL") in accordance with Canadian generally accepted accounting principles. Copies of these documents are available on the System for Electronic Data Retrieval ("SEDAR") at www.sedar.com.

Non-GAAP Measures

EBITDA is a non-GAAP performance measure. EBITDA represents income (excluding interest income) before interest expense, income taxes, depreciation, amortization, non-controlling interest and stock based compensation. EBITDA is not a recognized performance measure under GAAP and does not have a standardized meaning prescribed by GAAP. Seacliff believes that EBITDA is a useful complementary measure of pre-tax profitability commonly used to evaluate a company's financial performance. The most directly comparable measure to EBITDA calculated in accordance with GAAP is net income. EBITDA Margin is calculated as EBITDA divided into and expressed as a percentage of construction contract revenue.

Forward-Looking Statements

This Press Release contains statements concerning Seacliff's services, uses 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 Seacliff'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 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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