MONTREAL - SNC-Lavalin Group Inc. (TSX: SNC) today announced its results for the fourth quarter and year ended December 31, 2019.

All currency references in this press release are in Canadian dollars except as otherwise indicated.

2019 Fourth Quarter Financial Highlights

New strategic direction continuing to deliver results: In July 2019, SNC-Lavalin announced a new strategic direction focused on de-risking the business through exiting bidding on lump-sum turnkey (LSTK) contracts and prioritizing the Company's high-value SNCL Engineering Services business line. The SNCL Engineering Services continued its solid performance during the quarter with strong revenue, EBIT and EBIT margins; LSTK construction contracts backlog for SNCL Projects reduced to $3.0 billion as at December 31, 2019 from $3.2 billion as at September 30, 2019.

Strong operating cash flow: SNC-Lavalin generated operating cash flow of $312 million, the highest quarterly amount since the fourth quarter of 2017, increasing total cash on the balance sheet to $1.2 billion as at December 31, 2019; net recourse debt to EBITDA ratio under the Company's Credit Agreement reduced to 2.1x from 3.4x in the third quarter of 2019 and down from 2.9x in the fourth quarter of 2018.

Resources restructuring: The Company made the decision to close Valerus, non-core, underperforming, mid-stream oil and gas production and processing facilities based in Houston, and took a restructuring charge in the fourth quarter of 2019 of approximately $72 million, of which approximately $53 million was non-cash. The Company continues to actively explore all options for the remaining Resources business as it winds down the remaining LSTK projects and is right-sizing overhead as the business evolves.

Federal charges settled: SNC-Lavalin Construction Inc., a subsidiary of SNC-Lavalin Group Inc., pled guilty to one charge of fraud; all charges against SNC-Lavalin Group Inc. were withdrawn and the Company agreed to a fine of $280 million, payable in equal instalments over five years. As a result, the Company recognized a non-cash accounting charge of $257.3 million, reflecting the net present value of the full settlement amount.

Cost reduction program: In the fourth quarter of 2019, the Company successfully completed its $250 million annual run-rate cost reduction program.

IFRS net loss attributable to SNC-Lavalin shareholders: Net loss attributable to SNC Lavalin shareholders was $293 million, mainly due to the non-cash, net present value of the Federal charge settlement being recognized in full in the quarter, and restructuring charges.

CEO Commentary

Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc., made the following comments in relation to the Company's 2019 fourth quarter and year-end results: '2019 was a challenging year for us in many ways. We were tested as a Company, and went through some very difficult times, but I am very proud to say that we took decisive action and are stronger for it. In July, we took the decision, with the support of the Board, to set a different course, and point the Company in a new strategic direction: we exited bidding on LSTK contracts and focused on growing our high-value SNCL Engineering Services business, therefore de-risking the business and positioning it to generate consistent earnings and cash flow. Six months into our new strategic direction, it is clear to me after two quarters of solid results in the second half of 2019, that the strategy is delivering, and that we made the right decision.

'In the fourth quarter of 2019, we generated strong operating cash flow, the highest since Q4 2017, and delivered solid earnings on an adjusted basis. Our SNCL Engineering Services business line continued to perform well, and we continued to reduce the SNCL Projects LSTK backlog. We also took the necessary decision to close Valerus, non-core, unprofitable, mid-stream oil and gas production and processing facilities, as part of our commitment to restructure the Resources business. Additionally, we appointed a President of Infrastructure Projects, a role dedicated solely to executing and managing the wind-down of the remaining LSTK infrastructure projects.

'We settled the federal charges resulting from the Company's legacy activities in Libya. With this issue behind us, our new strategy firmly in place, and a refocused senior leadership team, which includes the appointment of a new Chief Transformation Officer, a new Executive Vice President and General Counsel, and an incoming Chief Financial Officer, we are well-positioned for the next chapter in the Company's growth and transformation into a professional engineering services and project management solutions provider.'

Fourth Quarter Results

The Company reported an IFRS net loss attributable to SNC-Lavalin shareholders of $292.9 million, or $1.67 per diluted share for the fourth quarter of 2019, compared with a loss of $1.6 billion, or $9.11 per diluted share, for the corresponding period in 2018. The Company's fourth quarter 2019 net loss attributable to SNC-Lavalin shareholders was due to the Federal charges settlement (PPSC) of $257.3 million and after-tax restructuring costs of $99.6 million mainly related to the decision made to close the Company's Valerus facilities in Houston.

Adjusted net income from E&C(1) in the fourth quarter of 2019 increased to $79.1 million, or $0.45 per diluted share, compared with an adjusted net loss from E&C(1) of $284.1 million, or $1.62 per diluted share, for the corresponding period in 2018. The higher adjusted net income from E&C(1) in the fourth quarter of 2019 was mainly due to improved results in the Resources segment, and lower financial expenses.

SNCL Engineering Services

Revenue from the SNCL Engineering Services line of business, which includes the EDPM, Nuclear, Infrastructure Services, and Capital segments, totaled $1.6 billion for the fourth quarter of 2019, an increase of 1.9%, compared to the fourth quarter of 2018, mainly due to a revenue increase of 20.8% in Infrastructure Services, which offsets a decrease in the Capital segment of 53.1%.

SNCL Engineering Services, excluding Capital, recorded a strong Segment EBIT(7) and Segment EBIT ratio of $159.0 million and 10.1%, respectively, in line with the fourth quarter of 2018. The Capital Segment EBIT(7) was lower due to a decrease in Highway 407 ETR dividends following the sale of a portion of the Company's interest in Highway 407 ETR during the third quarter of 2019.

SNCL Projects

Revenue from the SNCL Projects line of business, which includes LSTK construction contracting in the Infrastructure EPC Projects and Resources segments, totaled $826.3 million for the fourth quarter of 2019, a decrease of 15.9% compared to the fourth quarter of 2018. This was mainly due to the continuing backlog run-off of certain major LSTK construction projects, coupled with no new bidding by the Company in this market.

SNCL Projects recorded a negative Segment EBIT(7) totaling $27.8 million in the fourth quarter of 2019. The negative Segment EBIT(7) was due to the Resources segment which recorded a loss of $51.2 million mainly due to three factors: unfavourable reforecasts on certain Resources LSTK construction projects, continuing underperformance of the midstream oil and gas production and processing facilities, and overhead costs that are in the process of being right-sized to align with a lower level of activity. These were partially offset by a strong quarter from the Infrastructure EPC Projects segment, as the Company continues to progress on its major light rail transit (LRT) projects.

Backlog and Bookings

The Company's backlog totaled $15.3 billion as at December 31, 2019, 2.5% higher than at the end of December 2018. The backlog for SNCL Engineering Services increased by 8.9% to $11.3 billion, while SNCL Projects backlog continues to decrease and totaled $4.0 billion. SNCL Engineering Services total bookings for the fourth quarter of 2019 amounted to $1.4 billion. Contracts bookings for SNCL Engineering Services amounted to $6.9 billion for 2019, representing a 1.2 book-to-bill ratio, with $3.7 billion of bookings in the EDPM segment, $2.3 billion in the Infrastructure Services segment and $0.9 billion in the Nuclear segment.

LSTK Projects Update

The Company continued to run off the LSTK projects component of its SNCL Projects backlog which totaled $3.0 billion at the end of the fourth quarter of 2019, down from $3.2 billion as at September 30, 2019. The Company expects to complete most of its remaining Resources LSTK construction projects by the end of 2020. The majority of the Company's LSTK project backlog represents light rail transit systems projects for which the Company has a long track record of executing successfully. The Company reduced its Infrastructure EPC Projects and Resources LSTK backlog by 3.5% and 19.6%, respectively, compared to the end of the third quarter of 2019.

Financial Position and Cash Flows

As of December 31, 2019, the Company had $1.2 billion of cash and cash equivalents, $1.2 billion of recourse debt and $0.4 billion of limited recourse debt, as well as $2.4 billion in unused capacity under its $2.6 billion committed revolving credit facility.

As at December 31, 2019, the net recourse debt to EBITDA ratio calculated in accordance with the terms of the Company's Credit Agreement improved substantially year-over-year and quarter-over-quarter to 2.1x.

Quarterly Dividend

The Board of Directors today declared a cash dividend of $0.02 per share, payable on March 27, 2020, to shareholders of record on March 13, 2020. This dividend is an 'eligible dividend' for income tax purposes.

2020 Outlook

The Company expects that in 2020 the gross revenue from SNCL Engineering Services, excluding Capital, will grow by a low single digit percentage, and that Segment EBITDA(9) as a percentage of gross revenue, from SNCL Engineering Services, excluding Capital, will be between 10% and 12%.

This outlook is based on the assumptions and methodology described in the Company's 2019 Management's Discussion and Analysis 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, which are more fully described in the Company's public disclosure documents.

Special Committee

The special committee established by the Board in December 2018 explored a range of alternatives to protect and enhance value for SNC-Lavalin. The Company has charted a new strategic direction and succeeded in resolving legacy legal matters. Having now fulfilled its mandate, the committee has been disbanded.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world. SNC-Lavalin connects people, technology and data to help shape and deliver world-leading concepts and projects, while offering comprehensive innovative solutions across the asset lifecycle. Our expertise is wide-ranging - consulting & advisory, intelligent networks & cybersecurity, design & engineering, procurement, project & construction management, operations & maintenance, decommissioning and sustaining capital - and delivered to clients in four strategic sectors: EDPM (engineering, design and project management), Infrastructure, Nuclear and Resources, supported by Capital.

Forward-looking Statements

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', 'goal', 'intends', 'may', '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 and ii) business and management strategies and the expansion and growth of the Company's operations. All such forward-looking statements are made pursuant to the 'safe-harbour' 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 2019 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: (a) results of the new 2019 strategic direction coupled with a corporate reorganization; (b) fixed-price contracts or the Company's failure to meet contractual schedule, performance requirements or to execute projects efficiently; (c) contract awards and timing; (d) remaining performance obligations; (e) being a provider of services to government agencies; (f) international operations; (g) Nuclear energy services; (h) ownership interests in Capital investments; (i) dependence on third parties; (j) joint ventures and partnerships; (k) information systems and data; (l) competition; (m) professional liability or liability for faulty services; (n) monetary damages and penalties in connection with professional and engineering reports and opinions; (o) insurance coverage; (p) health and safety; (q) qualified personnel; work stoppages, union negotiations and other labour matters; (s) extreme weather conditions and the impact of natural or other disasters and global health crises; (t) intellectual property; (u) divestitures and the sale of significant assets; (v) impact of operating results and level of indebtedness on financial situation; (w) liquidity and financial position; (x) indebtedness; (y) security under the SNC Lavalin Highway Holdings Loan; (z) dependence on subsidiaries to help repay indebtedness; (aa) dividends; (bb) post-employment benefit obligations, including pension-related obligations; (cc) working capital requirements; (dd) collection from customers; (ee) impairment of goodwill and other assets; (ff) outcome of pending and future claims and litigations; (gg) ongoing and potential investigations; (hh) settlements; (ii) further regulatory developments as well as employee, agent or partner misconduct or failure to comply with anti-bribery 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) Brexit; (nn) global economic conditions and (oo) fluctuations in commodity prices.

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 2019 MD&A.

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 such forward-looking statements whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.

Contact:

Daniela Pizzuto

Tel: 514-393-8000

Email: media@snclavalin.com

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