AECOM to exit 30 countries, change leadership | Dump Trucks Charlotte NC

In a conference call on Monday, AECOM chairman and CEO Michael S. Burke said the company’s record full-year revenue wins and backlog in fiscal year 2018 have AECOM in a strong position for growth in 2019 and beyond.

Burke also said that despite some record-setting numbers in 2018’s fourth quarter and full year, the adjusted earnings before interest, tax, depreciation and amortization (EBITDA) for both time periods fell below expectations, due in part to the timing of AECOM Capital asset sales and execution challenges on some projects in the Construction Services division. Volume-related under-performance in the United Kingdom due to continued uncertainty around Brexit also contributed to lower-than-expected numbers.

In response, AECOM shared three strategic actions to improve profitability, de-risk business and prioritize investments in its highest-growth markets.

1. AECOM initiated a $225 million general and administrative expenses reduction plan, with most of the reductions scheduled to occur in the first half of fiscal 2019. Design and consulting services will see the greatest benefit from this action.

2. After an ongoing review of geographic exposure, the columbus oh dump truck company expects that it will exit more than 30 “smaller” countries so it can focus on prioritizing investment in its largest growth markets where it has the most competitive advantage.

3. The columbus oh dump truck company said that issues in its Construction Services division​ that impacted the fiscal year were “avoidable and unacceptable.” After a thorough review of its portfolio, AECOM opted to change the business’ leadership. “With new leadership in place, we are optimistic for the future,” said Chief Financial Officer Troy Rudd. AECOM confirmed that Chief Operating Officer Randy Wotring will lead the division, and also that Dan McQuade, who had served as president of the segment, is no longer with the company.

Design and Consulting Services (DCS)

DCS, which accounted for 54% of the firm’s 2018 adjusted operating income, realized 17% organic growth in the Americas in the second half of 2018 and market conditions remain favorable, especially in light of the billions of dollars in infrastructure voters approved in the recent midterm elections and renewed talk about a comprehensive infrastructure bill, said Rudd. Quick mobilization after storms also helped the division’s bottom line.

Although the Asia-Pacific region posted 7% growth for the year, led by Australia’s transportation market and a robust Greater China market, some of that gain was offset by low volume in the U.K. amid uncertainty about the mid- and long-range impacts Brexit will have.

Fourth quarter revenue was $2.2 billion and full-year revenue was $8.2 billion. Operating income for the fourth quarter and full year was $126 million and $455 million, respectively.

Management Services (MS)

Driven by strong conversion of its backlog, MS, which is comprised of technical support services and maintenance primarily for the U.S. government, accounted for 27% of AECOM’s 2018 adjusted operating income, witnessing a 14% increase in organic revenue growth. Fourth quarter revenue was $1 billion and full-year revenue was $3.7 billion. Fourth quarter and full-year operating income was $50 million and $200 million, respectively.

Rudd says the division is exiting the year at a near-record level thanks in part to $30 billion of pipeline opportunities and another $15 billion of bids currently under client evaluation. The MS backlog has increased nearly 120% since the beginning of fiscal year 2017.

Construction Services (CS)

Building construction, which falls under CS, achieved double-digit organic growth in the fourth quarter and, with the win of the $7 billion JFK terminal project in New York along with joint venture partner Walsh Construction, that momentum will continue into 2019, experts predict. Civil construction performed to expectations and Rudd called it a “solid contributor.”

Fourth quarter and full-year revenues for the division were $2.1 billion and $8.2 billion, respectively, with operating income at $21 million for the quarter and $109 million for the year.

An expected decline in the power segment negatively impacted overall numbers, as did lower volumes stemming from AECOM’s decision to leave the fixed-price combined-cycle gas power plant construction market and several execution challenges across the division. 

Overall, CS contributed 18% to AECOM’s 2018 adjusted operating income.