AECOM, the international infrastructure company that is preparing its exit from contracting for the U.S. Energy Department, on Tuesday reported record annual revenue but a net loss for its fiscal 2019.
Company-wide revenue of almost $20.2 billion was up 2% from $20.15 billion in fiscal 2018, according to AECOM’s latest earnings report. But the net loss of $266 million, or $1.66 per diluted share, was a steep drop from earnings of $440 million, or $2.75 per diluted share, in the prior year.
Restructuring expenses and problems with a self-construction business factored into the loss, AECOM said in its press release.
The Los Angeles-based company issued its financial results for its fourth quarter and 2019 fiscal year ended Sept. 30.
AECOM’s quarterly revenue of $5.1 billion was down about 4% from $5.3 billion on a year-over-year basis. The company posted a net loss for the quarter of $475 million, or $3.01 per diluted share. That compared to net earnings of $84 million, or $0.52 per diluted share, for the fourth quarter of fiscal 2018.
Executives said last month they had sealed a $2.4 billion deal to sell AECOM’s Management Services business to a joint venture formed by New York City-based investment firms American Securities and Lindsay Goldberg. The company will use revenue from the sale largely for debt retirement and stock repurchases.
The parties must make antitrust-related filings with the U.S. Federal Trade Commission and Department of Justice, along with the European Union.
Management Services handles major contracts with the Department of Energy and its semiautonomous National Nuclear Security Administration. The unit is currently lead partner in joint ventures on DOE contracts collectively worth about $18 billion at the Waste Isolation Pilot Plant in New Mexico, the Oak Ridge Site in Tennessee, the Hanford Site in Washington state, and the Savannah River Site in South Carolina.
The Management Services group also gets its share of business for NNSA. Until last November, AECOM was a partner on the management and operations contractor for the Los Alamos National Laboratory in New Mexico. It remains part of the prime team for the Lawrence Livermore National Laboratory in California. The two labs are involved in nuclear weapons design and modernization of the U.S. nuclear weapon stockpile.
AECOM is also in the nuclear power plant decommissioning business in North America and the United Kingdom.
If the sale closes by February, AECOM would divest the business about six months earlier than its original plan to spin it off into a separate business via an initial public offering. The sale is part of a larger strategy to “de-risk and simplify” AECOM’s structure, including exiting operations in about 30 nations, according to the press release.
Getting out of underperforming businesses or nonprofitable nations can be costly: AECOM expended between $130 million and $160 million on restructuring costs during fiscal 2019.
During a Tuesday conference call with Wall Street analysts, there was scant discussion of the Management Services sale save for the observation by AECOM Chairman and CEO Michael Burke that the company is getting a “premium” price for the group that employs about 25,000 people, chiefly in North America and the United Kingdom. AECOM has previously disclosed it expects the sale to close by Feb. 12, although the deadline could be extended to April 12 if government regulatory approvals drag on longer than expected.
Management Services’ revenue for the fourth quarter was $1.1 billion, up 7% from $1 billion a year ago. Yearly revenue for the business was $4.1 billion, 11% better than $3.9 billion in fiscal 2018. The unit’s organic revenue, from existing business, grew 11% over the prior year.
“Our strong 2019 results are a testament to the impacts of the strategic actions we began executing two years ago to enhance profitability and maximize shareholder value,” Burke said in the press release.
Burke acknowledged the sale of Management Services will in the short term at least reduce AECOM’s revenue. Management Services accounted for 20% of the company’s total revenue for fiscal 2019.
AECOM noted in its 10-K annual report filed this week with the U.S. Securities and Exchange Commission that it continues to seek more than $103 million from DOE under the Contracts Disputes Act over costs incurred at the Separations Process Research Unit (SPRU) in New York state.
In February 2011, AECOM and DOE signed a task order modification that made AECOM responsible for project costs in excess of $146 million. But in August 2011 Hurricane Irene hit New York. AECOM blames the hurricane together with “unanticipated requirements and permitting delays by federal and state agencies” for most of the increased cost.
