EDMONTON, Alberta and NEW YORK, Feb. 24, 2021 (GLOBE NEWSWIRE) -- TSX, NYSE:STN Unless otherwise indicated, financial figures are expressed in Canadian dollars, and comparisons are to the prior periods ended December 31, 2019. Stantec today reported its results for the fourth quarter and year ended December 31, 2020, updated its 2021 outlook, and provided an update on the timeline required to achieve its long-term strategic targets. “In a year like no other, we leaned on our core values of doing what is right and putting people first. In doing so, we delivered record earnings while achieving best in class sustainability ratings and employee retention rates,” said Gord Johnston, President and CEO. “I want to thank our employees for remaining steadfast through the pandemic and for their hard work in continuing to execute our strategic plan.” “A key element of our strategic plan to drive operating efficiency is our commitment to optimize our occupancy footprint,” continued Mr. Johnston. “In the fourth quarter, we began implementing this plan, through which we intend to achieve an approximate 30% reduction in our existing real estate footprint by the end of 2023. In addition to reducing our office-based emissions in support of our carbon neutrality and net-zero goals, the redirection of capital deployed to real estate will drive an immediate and material increase to net income. As a result, we have increased our earnings guidance for 2021.” “We are also affirming today that we intend to meet our long-term financial targets, as set out in our strategic plan, by the end of 2023. With a strong balance sheet, enviable backlog, and healthy acquisition pipeline, we are focused on delivering growth and shareholder value in 2021.” Full-Year 2020 Financial Highlights Stantec's full-year adjusted net income increased 10.6% to $248.9 million and adjusted diluted earnings per share ("EPS") increased 9.9% to $2.22. Earnings for the year exceeded expectations on the strength of the company’s fourth quarter performance where net revenue generation was slightly stronger and discretionary costs were significantly lower than anticipated. As well, strong fourth quarter cash flow generation led to lower than expected interest expense. Stantec’s strong business performance was augmented by the favorable resolution of certain tax matters recorded in the fourth quarter. Net revenue was comparable to the prior year, with a slight decrease of 0.7% or $26.8 million, mainly due to organic retraction of 1.8%. Organic growth was achieved in the Energy & Resources and Water businesses. Other businesses and regions experienced nominal retractions, with the exception of Buildings which retracted 7.2% due to pandemic-related disruptions.Gross margin decreased 3.9%, or $77.9 million, and decreased as a percentage of net revenue from 54.1% to 52.4%, primarily due to the impact of pandemic-related disruptions as well as project mix.Administrative and marketing costs were 36.7% of net revenue compared with 38.6% in the prior year, primarily as a result of improved operational efficiencies, the implementation of staffing strategies in response to the pandemic, and reduced discretionary spending. Partly offsetting the reductions is $5.0 million in COVID-related expenses incurred primarily for severance.Adjusted EBITDA from continuing operations increased by 0.8% to $578.9 million compared to $574.4 million, and adjusted EBITDA margin increased by 0.2% to 15.7% from 15.5% in 2019.Net income from continuing operations decreased 18.2%, or $35.3 million, to $159.1 million, and diluted EPS decreased by 18.4%, or $0.32, to $1.42 primarily due to the recording of $78.6 million in non-cash lease asset and related property and equipment impairments (pre-tax) arising from the strategic initiative to optimize occupancy costs.Contract backlog is $4.4 billion—a 2.8% increase from December 31, 2019—representing approximately 11 months of work. Year over year, backlog grew organically by 3.1%.Net debt to adjusted EBITDA was 0.7x at December 31, 2020—below the internal guideline of 1.0x to 2.0x.Operating cash flows from continuing operations increased 33.9% from $449.9 million to $602.6 million; this improvement was mainly due to increased cash receipts from clients and reduced payments paid to suppliers. These increases were partly offset by higher payments made to employees and higher income tax paid.Days sales outstanding was 75 days, a strong improvement compared to 79 days at December 31, 2019, and 82 days at September 30, 2020.In line with Stantec's growth strategy, three acquisitions were completed in the fourth quarter of 2020. These acquisitions complement the company's existing businesses and geographic operations and are expected to deliver immediate value.$300 million senior unsecured notes that bear interest at a fixed rate of 2.048% per annum were issued through private placement on October 8, 2020. These were assigned an investment-grade credit rating of BBB by DBRS Limited. The proceeds were used to repay a portion of existing indebtedness on the revolving credit facility.2,047,948 common shares were repurchased for an aggregated price of $78.3 million under Stantec's normal course issuer bid (NCIB). The NCIB was renewed on November 12, 2020 which allows for the repurchase of up to 5,605,224 of Stantec's common shares.Subsequent to the end of the year, Stantec agreed to acquire GTA consultants, a 135-person transportation firm based in Australia.A dividend of $0.165 per share, payable on April 15, 2021, to shareholders on record on March 31, 2021, was declared by Stantec's Board of Directors on February 24, 2021, representing a 6.5% increase on an annual basis. Strategic Value Creation Stantec launched its strategic plan in December 2019 with the aim to grow and diversify sustainably for the benefit of clients, employees, and shareholders. Stantec made significant progress across its four strategic value creators in 2020. Excellence Stantec's focus on excellence enabled it to meet and exceed stakeholder expectations, even in the face of the challenges brought on by the pandemic. Entering 2020, the company was well positioned for success, having significantly restructured its leadership model and leaned out its organization, which removed approximately $45 million from its cost structure. Strong execution and operational efficiency, including a rigorous focus on discretionary spending, resulted in a 59.8% improvement in free cash flow and a 0.2% increase in Adjusted EBITDA margin to 15.7% compared with 15.5% in 2019. Stantec's strategic initiative to optimize its occupancy footprint targets an approximate 30% reduction in existing real estate square footage by the end of 2023. This is expected to materially increase net income and maximize the return on investment in real estate by subleasing space that is not required. In addition, the implementation of a flexible workplace model to support this initiative is expected to increase the satisfaction and productivity of employees. Achieving a lower space per employee ratio is also key to Stantec achieving net-zero carbon emissions by 2030. Stantec has been ranked, for the second consecutive year, on Corporate Knights’ list of the Top 100 most sustainable companies in the world. For 2021, Stantec was ranked as the fifth most sustainable company in the world, and first in North America - the only engineering and design firm to be included on this exclusive list. Sustainability – encompassing environmental, social, and governance performance – is a critical component of the excellence value creator and central to Stantec’s core values. This recognition from Corporate Knights is a validation of Stantec’s leadership position on sustainability across all sectors and geographies. Innovation Innovation is an essential component of continued market competitiveness, and a key enabler for organic growth and for the achievement of Stantec's sustain