Quarterly Reports 2021

MONTREAL: May 14, 2021 – SNC-Lavalin Group Inc. (TSX: SNC), a fully integrated professional services and project management (“PS&PM”) company with offices around the world, today announced its results for the first quarter ended March 31, 2021.

First Quarter Highlights and Key Metrics from Continuing Operations

• Net income from continuing operations attributable to SNC-Lavalin shareholders of $67.7 million, or $0.39 per diluted share.
• SNCL Engineering Services delivers solid Q1 results
• Revenues of $1.5 billion.
• Segment Adjusted EBIT⁽¹⁾ of $132.8 million, representing a 8.8% margin.
• Segment Adjusted EBIT to revenue ratio⁽²⁾ of 8.6%, 13.9% and 5.8% for EDPM, Nuclear and Infrastructure Services, respectively, in line with Company’s targets.
• Net cash generated from operating activities of $118 million.
• Bookings of $1.7 billion, representing a 1.15 booking-to-revenue ratio⁽⁶⁾. Backlog at $11.1 billion as at March 31, 2021.
• SNCL Projects backlog continues to decrease
• LSTK construction contracts backlog reduced by $241.5 million in the quarter to $1.6 billion as at March 31, 2021.
• Financial position remains strong
• As at March 31, 2021, the Company had cash and cash equivalents of $702.7 million and a net recourse debt to EBITDA ratio⁽⁷⁾ of 1.8 (calculated in accordance with the Company’s Credit Agreement).

2021 Outlook for SNCL Engineering Services maintained

• SNCL Engineering Services revenue for 2021 forecast to grow by a low single digit percentage, compared to 2020, and Segment Adjusted EBIT to revenue ratio⁽²⁾ expected to be between 8% and 10%.

Investor day to be held on September 28, 2021

• SNC-Lavalin’s management will provide an update on the Company’s strategy and outlook, including growth opportunities in EDPM, Nuclear and Infrastructure Services.

IFRS First Quarter Financial Highlights

Non-IFRS First Quarter Financial Highlights

*Comparative figures have been re-presented as a result of an operation discontinued in 2020

CEO Commentary

“We had a strong start to the year with a first quarter in line with our expectations, as our Engineering Services business, which includes the EDPM, Nuclear and Infrastructure Services segments, delivered another solid quarterly performance. We are seeing a strong pipeline of new work across all of our core geographies, as governments continue investing in new projects,” said Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc. “SNC-Lavalin is well positioned for growth and a sustainable future. A fundamental part of that future is our commitment to ESG, and today I am proud to announce specific targets to increase the representation of women throughout the Company as part of our ED&I objectives, as well as a clear path to Net Zero Carbon Emissions by 2030.”

First Quarter Results

The Company’s net income from continuing operations attributable to SNC-Lavalin shareholders was $67.7 million, or $0.39 per diluted share in Q1 2021, compared to $0.9 million, or $0.01 per diluted share, for the corresponding period in 2020. This was comprised of net income from continuing operations from PS&PM of $61.0 million, or $0.35 per diluted share and net income from continuing operations from Capital of $6.7 million, or $0.04 per diluted share in Q1 2021. For the corresponding period in 2020, net income from continuing operations was comprised of net income from continuing operations from PS&PM of $21.0 million, or $0.12 per diluted share and net loss from continuing operations from Capital of $20.0 million, or $(0.11) per diluted share. Q1 2021 net income included amortization of intangible assets related to business combinations of $23.3 million ($19.1 million after taxes), while Q1 2020 included amortization of intangible assets related to business combinations of $40.5 million ($33.0 million after taxes) and a fair value revaluation of Highway 407 ETR contingent consideration receivable of $57.2 million ($49.6 million after taxes).

Adjusted net income from PS&PM⁽⁴⁾ in Q1 2021 increased by 36.6% and totaled $83.4 million, or $0.48 per diluted share, compared with $61.1 million, or $0.35 per diluted share, for Q1 2020. The increase was mainly due to a higher Segment Adjusted EBIT⁽¹⁾ in SNCL Engineering Services and lower Corporate selling, general and administrative expenses, partially offset by a negative Segment Adjusted EBIT⁽¹⁾ in SNCL Projects and a lower Segment Adjusted EBIT⁽¹⁾ in Capital.

Lines of Business

SNCL Engineering Services

The SNCL Engineering Services line of business (comprised of the EDPM, Nuclear and Infrastructure Services segments) continued to deliver solid results, benefitting from a diversified business model, long-term client relationships and a strong public sector focus.

As expected, since COVID-19 did not significantly impact SNCL Engineering Services in Q1 2020, revenue for Q1 2021, compared to Q1 2020, decreased by a low single digit percentage. Revenue from SNCL Engineering Services totaled $1,515.1 million in Q1 2021, a 1.3% decrease from the corresponding period in 2020, while Segment Adjusted EBIT⁽¹⁾ totaled $132.8 million in Q1 2021, representing a margin of 8.8%, compared to $111.5 million in Q1 2020, representing a margin of 7.3%. SNCL Engineering Services total backlog increased by 1.1% and amounted to $11.1 billion as at March 31, 2021, compared to $11.0 billion as at March 31, 2020. Total bookings for Q1 2021 amounted to $1.7 billion despite the current challenging COVID-19 environment, representing a 1.15 booking-to-revenue ratio⁽⁶⁾.

• EDPM revenue amounted to $933.2 million in Q1 2021, compared to $945.1 million in Q1 2020. EDPM Segment Adjusted EBIT⁽¹⁾ totaled $80.6 million, representing a margin of 8.6% in Q1 2021, compared to $57.5 million in Q1 2020, representing a margin of 6.1%. The Segment Adjusted EBIT⁽¹⁾ improvement in Q1 2021 mainly reflected solid performance in the core geographies of the UK, Canada and the United States, improved margins in the Middle East as a result of actions to adjust the cost base over the past year, and the settling of a small number of project final accounts. Backlog was strong at March 31, 2021, at $2.9 billion, an increase of 10.4% compared to March 31, 2020. Bookings in Q1 2021 totaled $1.0 billion, representing a 1.07 booking-to-revenue ratio⁽⁶⁾.
• Nuclear revenue amounted to $229.1 million in Q1 2021, compared to $236.9 million in Q1 2020. Nuclear Segment Adjusted EBIT⁽¹⁾ totaled $31.8 million in Q1 2021, representing a margin of 13.9%, compared to $36.7 million in Q1 2020, representing a margin of 15.5%. The revenue variance was mainly due to a decreased level of activity in Asia and Canada, as some projects achieved major delivery milestones in 2020, partially offset by higher volume in Europe and the United States. Backlog totaled $0.9 billion at March 31, 2021, a decrease of 16.6% compared to March 31, 2020. The backlog decrease over the last twelve months was mainly due to the progress on the Company’s major refurbishment long-term contracts in Canada. The segment continued to be awarded extensions to ongoing contracts in Canada and other long-term contracts in the US and the UK.
• Infrastructure Services revenue amounted to $352.8 million in Q1 2021, in line with Q1 2020. Infrastructure Services Segment Adjusted EBIT⁽¹⁾ totaled $20.4 million in Q1 2021, representing a margin of 5.8%, compared to $17.3 million in Q1 2020, representing a margin of 4.9%. The Segment Adjusted EBIT⁽¹⁾ increase was mainly due to a higher level of Operations & Maintenance activities combined with improved margins from Linxon. Backlog totaled $7.3 billion at March 31, 2021, in line with March 31, 2020. Bookings in Q1 2021 totaled $0.5 billion, representing a 1.50 booking-to-revenue ratio⁽⁶⁾. Infrastructure Services backlog includes long-term Operations & Maintenance contracts, which can cover periods of up to 40 years.

SNCL Projects

*Comparative figures have been re-presented as a result of an operation discontinued in 2020

Backlog for the SNCL Projects line of business (comprised of the Resources and Infrastructure EPC Projects segments) at the end of March 31, 2021, totaled $2.0 billion and included $1.6 billion of LSTK construction contracts and $0.4 billion of reimbursable and engineering services contracts. SNCL Projects backlog for LSTK construction contracts decreased by $241.5 million in Q1 2021, as the Company continued to execute on its LSTK projects.

SNCL Projects revenues amounted to $282.9 million in Q1 2021, compared to $287.5 million in Q1 2020. SNCL Projects Segment Adjusted EBIT⁽¹⁾ was negative $8.2 million in Q1 2021, compared to a positive Segment Adjusted EBIT⁽¹⁾ of $1.8 million in Q1 2020. The variance was mainly due to the Infrastructure EPC Projects segment, which recorded a negative Segment Adjusted EBIT⁽¹⁾ of $10.5 million in Q1 2021, compared to a positive Segment Adjusted EBIT⁽¹⁾ of $3.8 million in Q1 2020. This was mainly due to a reduction in gross margin, as the first quarter of 2021 included costs in closing out certain projects nearing completion and the impacts of COVID-19, partially offset by a reduction in overhead expenses.

The Company continues to target Q2 2021 for the closing of the binding agreement to sell the Oil & Gas business to Kentech Corporate Holdings Limited, announced on February 9, 2021.

Capital

Capital revenue and Segment Adjusted EBIT⁽¹⁾ totaled $21.7 million and $18.7 million, respectively, in Q1 2021, compared to $46.2 million and $42.0 million, respectively, in Q1 2020. The variance was mainly due to a decreased contribution from Highway 407 ETR, as no dividend was received from this investment in Q1 2021, compared to a dividend of $21.1 million in Q1 2020. Despite a reduction in traffic volumes since the beginning of the COVID-19 pandemic, SNC-Lavalin’s management continues to have confidence in the long-term value of the Highway 407 ETR concession.

Operating Cash Flow

The Company’s net cash generated from operating activities was $5.6 million in Q1 2021, compared to $23.4 million in Q1 2020. The Company continues to anticipate that its net cash generated from operating activities in 2021 will be broadly breakeven, as positive operating cash flow from SNCL Engineering Services is expected to be largely offset by an operating cash flow usage in SNCL Projects.

Financial Position

As at March 31, 2021, the Company had $702.7 million of cash and cash equivalents. The Company also has an additional $2.0 billion of available drawing capacity under its revolving credit facility. In March 2021, the Company repaid at maturity $175.0 million representing all of the outstanding Series 3 Debentures. As at March 31, 2021, the Company had $1.0 billion of recourse debt and $0.4 billion of limited recourse debt and its net recourse debt to EBITDA ratio⁽⁷⁾ calculated in accordance with the terms of the Company’s Credit Agreement was 1.8, below the required covenant level of 3.75.

Investor Day

SNC-Lavalin will hold a virtual Investor Day on Tuesday, September 28, 2021, where the Company’s leaders will provide an update on the Company’s strategy, outlook and continuing growth opportunities.

SNCL Engineering Services 2021 Outlook maintained

The following statements are based on current expectations. These statements are forward-looking and the actual results could differ materially. The 2021 Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.

The Company continues to expect that SNCL Engineering Services revenue for full year 2021 to increase by a low single digit percentage, compared to 2020, and for its Segment Adjusted EBIT to revenue ratio⁽²⁾ to be between 8% and 10% for the same period.

This outlook is based on the assumptions and methodology described in the Company’s Annual 2020 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 and in the Company’s 2020 Annual Management’s Discussion and Analysis.

Quarterly Dividend

The Board of Directors today declared a cash dividend of $0.02 per share, unchanged from the previous quarter. The dividend is payable on June 11, 2021, to shareholders of record on May 28, 2021. This dividend is an “eligible dividend” for Canadian federal and provincial income tax purposes.

First Quarter 2021 Conference Call / Webcast

SNC-Lavalin will hold a conference call today at 1:30 p.m. Eastern Time to review results for its first quarter of 2021. A live audio webcast of the conference call and an accompanying slide presentation will be available at www.investors.snclavalin.com. The call will also be accessible by telephone, please dial toll free at 1 800 319 4610 in North America or dial 1 604 638 5340 outside North Amer