North American Energy Partners Inc (NOA) Q4 2018 Earnings Conference Call Transcript

NOA earnings call for the period ending December 31, 2018.

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North American Energy Partners Inc  (NYSE:NOA)
Q4 2018 Earnings Conference Call
Feb. 26, 2019, 9:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, welcome to the North American Construction Group Earnings Call for the Fourth Quarter and Year Ending December 31, 2018. At this time, all participants are in a listen-only mode. Following management's prepared remarks, there will be an opportunity for analysts, shareholders and bondholders to ask questions.

The media may monitor this call in a listen-only mode. They are free to quote any member of management, but they are asked not to quote remarks from any other participant without that participant's permission.

I would now like to turn the conference over to David Brunetta, Director of Investor Relations.

David Brunetta -- Director, Investor Relations

Good morning. And good morning to everyone, and thank you for joining us. Welcome to the North American Construction Group's 2018 fourth quarter and year end conference call.

I'd like to remind everyone that today's comments contain forward-looking information. Additionally, our actual results may differ materially, from expected results because of various risk factors and assumptions. For more information about our results, please refer to our December 31, 2018 Management's Discussion and Analysis, which is available on SEDAR and EDGAR.

On today's call, Jason Veenstra, Executive Vice President and CFO, will begin by reviewing our fourth quarter results. Martin Ferron, Chairman and CEO, will then provide his comments on our outlook and strategy. Also with us on the call today are Joe Lambert, President & Chief Operating Officer, Barry Palmer, Senior Vice President of Operations and Rob Butler, Vice President, Finance. After management's prepared remarks, there will be a question-and-answer session.

I'll now turn the call over to Jason.

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Thanks David, and good morning everyone. As mentioned, I will provide a summarized financial overview of Q4 along with some brief commentary on our overall 2018 cash flow, and we'll close with the status of our Nuna acquisition and our purchase of the heavy equipment fleet in the middle of Q4.

Starting with our financials; top-line revenue for the quarter was CAD131 million, CAD49 million higher than 2017. This 60% year-over-year increase is indicative of the strong activity in the oil sands and was driven by the site work at the Millennium, Mildred Lake and Kearl mines. Consistent with the producers' public comments, this performance illustrates their persistent focus on throughput at their operating mines, despite the outside noise and market volatility.

The CAD131 million of revenue, includes CAD24 million from the M&A transactions we completed in mid-Q4, which I'll touch on later. The comparable Q4 revenue of CAD107 million represents a substantial increase in revenue of over 30%, reflects the demand, we are experiencing in the oil sands. In addition to the consistent production we are witnessing firsthand from our customers, several factors contributed to the strong volumes in Q4, when comparing to last year.

Number one, and most importantly, the contract stability related to term contracts we announced during 2018 has had a positive an incremental impact on overall work generated. On our contracted sites, the customer visibility and access to our equipment is providing higher utilization, as work is completed outside of the core contracted volumes.

Secondly, when compared to 2017, we had an earlier ramp-up of our winter works program at the Millennium and Mildred Lake mines. And third, an early stage heavy civil construction project at the Kearl mine has had a material impact on 2018 results.

Outside the oil sands, civil construction work at the Highland Valley copper mine continue to generate steady revenue and was slightly higher on a quarter-over-quarter basis, as the contract was signed in September, 2017. External maintenance revenue was also slightly up quarter-over-quarter. The move into our new maintenance and rebuild facility here in mid-November were seamless from a revenue perspective and we remain on a positive trend on what is an important diversification stream for us.

Moving to the expense side, where we always start with capital depreciation because it is such an important expense for us as a heavy equipment operator. Depreciation was CAD18.2 million for the quarter, or 13.9% of revenue, and was down from the 2017 level of 14.4%. This depreciation level reflects the benefits of higher utilization in operating hours as well as our maintenance initiatives, which are extending the useful lives of the fleet and their major components.

With these positive trends in both revenue and depreciation, gross profit achieved in the quarter was CAD18.3 million, a 14% margin. This dollar level compares very favorably to the CAD12 million posted in the prior year, a 50% year-over-year increase. The 14% margin we posted was slightly unfavorable to the 14.6% margin we posted in 2017. The decrease in margin is explained by the cost we incurred as part of the unavoidable impact of onboarding a 181 heavy equipment assets and the related personnel right in the middle of our winter season ramp-up.

In addition, the two months of Nuna results had an impact on margin, given this is their seasonally slower time. Excluding the one-time onboarding impact, and Nuna seasonality, gross margin was over 16% for the quarter and on a like-for-like basis significantly exceeded 2017 performance.

Below gross profit, G&A expense excluding stock-based compensation was CAD8 million for the quarter, higher by CAD2.3 million from 2017. This increase was driven by a higher short-term incentive costs associated with our strong 2018 results, as well as the one-time legal and consulting expenses required for acquisition activities. When excluding M&A activity, our G&A run rate of 5% of revenue is indicative of the level we expect moving forward.

Our specific note in the quarter, the stock-based compensation expense of CAD2.5 million was less severe than Q3, but nonetheless was incurred due to our continued stronger share price and its impact on the carrying value of the liability award plans. Interest expense of CAD3.4 million for the quarter was consistent with expectation, given the debt financing, we have put in place. We remain very happy with the credit facility and equipment financing we have arranged and continue to operate with an overall cost of debt under 5%.

Before we look at net income and EPS, I'll touch on the adjusted EBITDA margin of 21.7%. As mentioned, Q4 was impacted by the November onboarding of the heavy equipment fleet. Excluding these onboarding impacts, Q4 EBITDA margin was over 24%, again a full 2 percentage points ahead of 2017, which is consistent with the operational excellence trend line we are on.

The full synergies in the oil sands from our recent fleet acquisition are on schedule for 2019, but are not fully reflected in the short period of operations in 2018. In spite of this, full year 2018 EBITDA up 24.8%, establishes another profitability watermark, gained over the past five years of improvements and reflects the continuous drive for productivity and efficiency.

EBITDA of CAD28.4 million results in a full-year EBITDA of CAD101.8 million and compares to the 2017 equivalents of CAD63.1 million and 21.6%. In particular and for emphasis, this outstanding increase in margin of over 2 full percentage points is a testament to the incredible job done by operations over the past 12 months and do not reflect the full year impact of Nuna and the operation of our increased operating fleet, which is now a fleet of over 625 heavy equipment assets.

Regarding net income, we recorded CAD2.7 million of earnings compared to a similar CAD2.5 million last year. The CAD6.1 million improvement in gross profit was offset by CAD3.1 million of one-time G&A acquisition type costs and the stock-based compensation.The remaining CAD3 million is increased interest and deferred taxes, both incurred, as a result of higher gross profit levels. The positive net income equals basic earnings of CAD0.11 per share over the quarterly average of 25 million shares, when factoring in the one-time expenses previously mentioned, this is a quarterly EPS level of over CAD0.20 per share.

To close out the financial review, I'll briefly summarize our free cash flow performance. For 2018, we generated a CAD102 million in adjusted EBITDA, as provided in the MD&A, sustaining capital expenditures totaled CAD53 million for the year and when factoring in positive working capital of CAD40 million and other smaller cash impacts, this net of the business CAD60.7 million of free cash flow.

This cash flow generation was primarily used for two purposes. Approximately CAD20 million of cash was used on a net basis to fund growth capital and CAD50 million was used to purchase back our shares. The remaining cash was used to pay down debt throughout the year, or as left on the balance sheet at year-end, as we ended the year with over CAD19 million of cash on hand.

To close out, I'll provide a quick status of our acquisitions, both of which were fully financed using our credit facility. Consistent with the time needed to fully close transactions, the new acquisition, which was executed on November 1, formally closed last week and the purchase price of CAD42.8 million, as reflected in the financials did not change noticeably from the CAD42.5 million price that was announced back in September.

The fleet purchased on November 23 remains on target to fully close in Q1, as it goes through normal closing conditions. These two transactions did not have a noticeable impact on Q4 EPS, we are looking forward to reporting a full quarter in Q1. The fleet purchase will become part of standard reporting, but the Nuna acquisition will provide some complexity, as a few of the entities did not qualify for proportionate consolidation and their profits will be reported through equity earnings.

Once we have a full stand-alone quarter to report, this will be much easier to walk stakeholders through. The other complicating factor that we will need to address in our results, is the seasonal rebalancing that will occur as a result of our ownership interest in Nuna. As Martin will highlight, year-over-year comparisons moving forward will need to be completed with this in mind, as the majority of Nuna's profits come in Q2 and Q3 during the busy season in Northern Canada.

As has been mentioned, these acquisitions were financed through our CAD300 million credit facility and we appreciated the commercial support from all the members of the syndicate during a very busy Q4. We closed out the year with CAD100 million of liquidity available under our facility and over CAD50 million of room for additional capital leases. The strictly on our bank definition of debt to trailing EBITDA, the leverage ratio of 2.9 compares favorably to our allowable limit of 4.0.

On the next 12-month basis, our total debt leverage ratio, net of cash is 2.2 and the senior leverage ratio, which governs our credit facility and excludes both the convertible debentures and the mortgage is at 2.0. As we mentioned in the disclosures yesterday, we plan to use free cash flow to delever and fully expect our senior leverage to trend back below 2 in 2019.

And with those comments, I'll turn the call over to Martin.

Martin Ferron -- Chief Executive Officer & Chairman

Thanks, Jason, and a very good morning to everyone. As we look back, I will always remember 2018, as a transformational year for us, in which we invested significant growth by M&A activity to complement on already robust organic growth plan. Both the two M&A deals, we announced during the year did not close until very late in the period. They did not contribute much in a way of EBITDA, to always another stellar year of financial improvement.

For the full year, we grew revenue and EBITDA by 40% and 61% respectively, against stated targets of 15% for both, to follow on from 37% and 18% growth in these measures during 2017. Therefore, the signing benefits of the two acquisitions will be realized starting in 2019, which we believe will allow us to continue our hopefully impressive record of maintaining strong growth.

I will return to this thing, but first want to highlight other notable achievements of 2018. Firstly and most importantly, we preserved our top-tier record of safety performance. With our total recorded injury rate again coming in at well below 0.5. As the management of safety hazards is a crucial aspect of achieving overall operational excellence, I'm very pleased with our performance.

Second, we further improved our profitability with basic earnings per share coming in at CAD0.61 a share. This number was much nearer CAD1 a share, before the mark-to-market accounting for our liability based deferred stock-based compensation, and the one-off M&A related expenses, that Jason talk us through.

Third, the construction of our new heavy equipment maintenance and office facility here in Edmonton was completed ahead of time and on budget, such that we moved in during November.

Fourth, we build our backlog of contracted work to over CAD1.2 billion from less than CAD0.1 billion at the start of last year. We expect this trend to continue in 2019.

Fifth, we bought back nearly 1.3 million shares at an average price of CAD7.44 under our latest NCIB taking total repurchases to over 10.7 million shares at a dividend adjusted average price of about CAD4.70, since we initiated the buyback in 2013.

Sixth, we closed the acquisition of an ownership stake in Nuna Logistics in November, providing us with excellent revenue diversification, outside our core oil sands market. The majority ownership position in Nuna is held by Kitikmeot Corporation were already really impressed with our business acumen.

Last but not least, we closed the second acquisition involving over 180 heavy equipment assets on November 23rd and onboarded more than 450, assuming three significant contracts and we're fully operational by November the 26th. As part of this transaction, we entered a new and exciting exclusive partnership with Mikisew Group of Companies, which is directly owned by the Mikisew Cree First Nation, who are the largest in the five Athabasca Tribal Council Nations.

So, now turning back to our growth prospects for 2019. We currently anticipate the improvement to be around 75% of revenue and about 60% for EBITDA, which we trust it will consider to be impressive numbers. These expected increases could then propel our basic earnings per share to over a CAD1.60 for the year, which will be quite an achievement for a company that was making steep losses, not so long ago.

Due to the magnitude of this improvement, we believe it's prudent to provide an estimate of EBITDA proportionality by quarter during the year, which we presently assess as 30%, 20%, 22% and 28%.

The main variables impacting this assessment, for the first half of the year, are the timing of spring break up and the pace that we can schedule maintenance and repairs for some of the acquired mine support assets. Also, the busiest quarters for the work linked to our ownership stake in Nuna are in Q2 and Q3, and so this is completely counter-seasonal to oil sands operations. Additionally, for this assessment it is important to note that the term contracts we have in hand, allow more even scheduling of work throughout the year for cost optimization purposes.

At the anticipated level of profitability to 2019, we expect the current EBIT margins meet the construction industry leading levels, as well as returns on both capital and equity. The latter could be over 20%, which is a subject, I cover in more detail in my annual letter to the shareholders, which should be available this afternoon. We have tremendous operating leverage in our business, such that our SG&A expense will likely trend toward 5% and then plus 4%, before liability related to stock-based compensation as we continue to grow.

As far as capital spend and allocation is concerned for 2019, we expect to fund upto CAD90 million on sustaining capital, using the previously announced one-time spend -- including a previously announced one-time spend of CAD20 million on the recently acquired heavy equipment assets. This one-off expenditure will enable us to improve uptime and utilization of the board assets later in 2019 and beyond. The rest of our considerable operating cash flow, after interest and dividend payments will be allocated between debt reduction and growth capital, with a form getting priority.

We are committed to lowering our debt by CAD150 million over the 2019 to 2021 period, which is a task that slightly easier by the recent federal government announced accelerated depreciation schedules for capital assets. Due to the situation, we now do not expect to pay cash taxes until 2021.

Beyond 2019, we firmly believe that we have the cash flow and growth prospects to keep maintaining a double-digit compound annual growth rate in both revenue and EBITDA, while also achieving our debt reduction target. This belief is supported by the fact that much of our core work for the next three to five years is contracted, our link is strong and unwavering production from several oil sands mines. This is a significant change in the mainly spot contracting world of prior years. Having this large backlog of work allows us to more effectively plan our activities, especially equipment maintenance and should lead to margin expansion even without price escalation.

To close, I would like to commend my extremely talented and committed team of personnel. Basic principle of my leadership philosophy is that a Chief Executive should publicly take 100% of the blame, when things go wrong in a company and always share most of the credit, when things are going according to plan.

Well, my confidence level for the future remains extremely high, mostly because I can totally trust my amazing team to maintain our strong performance and growth. I could not be proud of them, especially for the professional and friendly way, they welcomed hundreds of new employees into our fold in November and quickly introduced them to our unique culture. We are now firing on all operational cylinders and I'm super excited about what 2019 and beyond will bring.

With that, I'd like to turn the call back to Denise, the operator, for the Q&A session.

Operator

Thank you. (Operator Instructions) Your first question comes from Yuri Lynk with Canaccord Genuity, your line is open.

Yuri Lynk -- Canaccord Genuity -- Analyst

Hi, good morning, guys.

Martin Ferron -- Chief Executive Officer & Chairman

Good morning.

Yuri Lynk -- Canaccord Genuity -- Analyst

Good morning. Martin, how's the acquired Aecon gear been relative to your initial expectations in terms of, how it's performed productivity, and maintenance, well, I guess the maintenance CapEx is unchanged, but because it's been pretty well as expected?

Martin Ferron -- Chief Executive Officer & Chairman

We knew we, we have to spend a significant sum of CAD20 million catching up on maintenance and repair. I think it's fair to say that the equipment was, it was in worse condition than we expected. But we still think the CAD20 million will cover the situation.

Yuri Lynk -- Canaccord Genuity -- Analyst

And does that impact the, I think, you had targeted previously, correct me, if I'm wrong, about CAD30 million of external maintenance revenue at the new facility? Does that have any bearing on that number?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah, the CAD30 million target is one that will take us a couple of years, maybe three years to achieve and we're in the middle of trying to balance our internal need for maintenance right now with external work. There's a lot of external work opportunity, but also plenty of internal need, so the bonus is quite tricky, but we're managing it well. So, that's the status there here we.

Yuri Lynk -- Canaccord Genuity -- Analyst

Okay. Shifting gears, the interesting press release at the end of last year on the option to acquire some ultra-class trucks, which you never used before. What's the thinking behind that, and what would you be using those trucks for?

Martin Ferron -- Chief Executive Officer & Chairman

Well, they're very useful for certain earth moving activities, especially overburden removal. So, when we got the opportunity to, to exercise that, that rights, we looked at our need for fleet, given the tremendous workload that we see and we believe that was need for more assets beyond what we picked up from the earlier acquisition. So, we were glad to take them out at what turns out to be a reasonable price we believe.

Yuri Lynk -- Canaccord Genuity -- Analyst

Okay. That's it from me. I'll hope back in the queue. Congratulations on a good quarter.

Martin Ferron -- Chief Executive Officer & Chairman

Thank you, Yuri.

Operator

Your next question comes from Maxim Sytchev with National Bank Financial. Your line is open.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Hi, good morning.

Martin Ferron -- Chief Executive Officer & Chairman

Hey, Max.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Martin, I was wondering if you don't mind just quantifying, what was the EBITDA contribution from the acquired assets and in Q4, if it's possible?

Martin Ferron -- Chief Executive Officer & Chairman

Jason will --

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Because I think you said it was de minimis right?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Yeah, I would, -- it was de minimis, is the right word, less than CAD1 million.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Okay. Okay. So, it was all organic. Excellent. And then do you mind maybe because, I think, it's right about now, where you're getting visibility on summer construction work. Martin, do you mind maybe just commenting on how that's shaping up?

Martin Ferron -- Chief Executive Officer & Chairman

Oh really well, especially we back on the Fort Hills' mine sites and there is plenty of activity schedule there. Also, Syncrude have got a major expansion project, Max, which we'll be bidding on. So, it shaping up really well even here in late February.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Okay. And then, I think in the past we talked a little bit about the LNG optionality for you guys. Just trying to think, how is the bidding environment for that particular project going right now?

Martin Ferron -- Chief Executive Officer & Chairman

We don't believe we will be participating in that, Max, for a couple of reasons. One is that we too busy doing the other things that make us good margin. And second, we don't think, we had a much of a chance that we did bid it. So, we will save ammunition for other things that we believe will serve us better.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Okay. And I guess, is it a question of just how competitive the environment is in that marketplace?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah, I think that project is one of lot of companies want to get their name on. We'd like to get our name too, but at a decent margin. And I don't think the two things are probably achievable.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Okay, that makes sense. And then, do you mind maybe commenting on Nuna now that you have it under your belt in terms of initial impressions and the ability to obviously capitalize that business potentially better, and how much of an opportunity that could be done for you guys?

Martin Ferron -- Chief Executive Officer & Chairman

We are really impressed, we closed the deal, it was a quiet time for them. So, we've got the opportunity to spend some time visiting and really again to totally understand the business. I think they got some really super bidding opportunities, which we can help them with. There's one in particular that we are bidding together. So, in the past, they didn't have access to, to heavy fleets, now they do and I think in the last going to open up some great opportunities for them that couldn't pursue previously.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Okay, that's helpful. And maybe last question from me. I mean obviously we're very pleased to see that the share price kind of aligning with the prospects and now that you have a bit of a better multiple. How does that enter your thinking around incremental M&A, whether it's tuck-in or something bigger? I mean, I understand that obviously your priority is to delever, but if, how do you square the better multiple environment right now for you?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah. I mean, I feel never shy about talking with the stock price. So, when the annual letter comes out, letter to shareholders this afternoon, I have some commentary in there on it. So, while the EBITDA multiple is risen a little bit. It's still well below peers, plus the earnings multiple is around 9 right. To me that seems more like an EBITDA multiple -- and earnings multiple.

So, we still think we can get a bit more love in the stock price. If that doesn't occur, we will always be looking at allocation of capital as we've done in the past. We've committed to delever, but it wouldn't hurt my feelings that we spend a bit more money, buying some more shares, if we got -- get the opportunity. So, it will always be a balance that we will address carefully.

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Okay. Now that's very helpful. Thank you very much. That's it from me.

Martin Ferron -- Chief Executive Officer & Chairman

Thanks Max.

Operator

Your next question comes from Devin Schilling with PI Financial. Your line is open.

Devin Schilling -- PI Financial Corp. -- Analyst

Hi guys, congrats on another great year here.

Martin Ferron -- Chief Executive Officer & Chairman

Thank you, Devin.

Devin Schilling -- PI Financial Corp. -- Analyst

Question here on the penetration and just, kind of, maybe little bit of a timeline on how long you think it will be to have everything fully integrated? And should we kind of impacting higher equipment costs over this period?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah. So, in my prepared remarks, with acquisition of the heavy fleet, I mentioned that we closed the deal, funded the deal on November 23rd, onboarded 450 people and took possession of 180 odd assets and we had an operational in three days, right. So, that's just staggering performance by our operating team.

Obviously, we've got to spend a bit of money, bringing the freed up to our operational standards. So, that will take a bit of time several months and it will contribute to incremental EBIT 2020. So, that integration went extremely well because it was mainly an asset deal that with a lot of operating personnel in the field.

Then the Nuna acquisition, the IP integration is ongoing. The biggest task in front of us is to bring them onto our enterprise system, which will ease our reporting and we don't schedule to get that done within two, three months here.

So that's the commentary I have on that, does that answer your question, Devin?

Devin Schilling -- PI Financial Corp. -- Analyst

Yeah, that's helpful. And I guess, we look at you guys is debt reduction here. Are you guys how looking at CAD50 million straight line, or this can be more front or back-end weighted, you guys have color there?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah, We'd like to keep some flexibility there, right. So, we've set a CAD150 million over three years. Going back to Max' question could be that there we might spend a little bit of money this year on share buyback, for example. So, the CAD150 million is over the three years.

Devin Schilling -- PI Financial Corp. -- Analyst

Okay, perfect, Martin. That's it for me. Congrats on another great quarter guys.

Martin Ferron -- Chief Executive Officer & Chairman

Thank you, Devin.

Operator

Your next question comes from Ben Cherniavsky with Raymond James. Your line is open.

Ben Cherniavsky -- Raymond James -- Analyst

Good morning, guys. Most of my questions have been answered. I just thought maybe -- I thought you can give just a little more clarity on the SG&A line. How much in dollars was the -- were the sort of headwinds that you noted because I think, you recognized that was -- it never seemed a little higher than, we would have expected, just given the leverage in revenue? Or could you just walk through that in little more detail?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Yeah Ben, Jason here. A little over CAD1 million was in that G&A and that's what gets us back to that 5% run rate outside of the stock based. And really that was around some of the overheads required on that quick transition with Aecon as well as legal and consulting fees. So, that sort of order of magnitude for Q4.

Ben Cherniavsky -- Raymond James -- Analyst

So, it was mostly the Aecon transaction or I was thinking your remarks is something about Nuna as well coming onboarding with Nuna that had impact of G&A?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

The cost of -- there is no onboarding cost for Nuna. But there was just legal and accounting fees associated with that transaction, so that's in the CAD1 million.

Ben Cherniavsky -- Raymond James -- Analyst

I see. Okay. So, CAD1 million sort of an all-in number for transactional costs in M&A?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

That's right.

Ben Cherniavsky -- Raymond James -- Analyst

Okay. That's helpful. Thanks very much.

Martin Ferron -- Chief Executive Officer & Chairman

Thanks, Ben.

Operator

(Operator Instructions) Your next question comes from Richard Dearnley with Longport Partners. Your line is open.

Richard Dearnley -- Longport Partners -- Analyst

Good morning. Could you -- that The Aecon assets, when they transferred to you, what was their utilization as you all would measure?

Martin Ferron -- Chief Executive Officer & Chairman

Richard, to be honest with you, we didn't even look at that. It was an asset transaction that we just had in mind, what we could achieve with the assets. This really didn't interest us. So, we didn't look at it.

Richard Dearnley -- Longport Partners -- Analyst

I see. And I take it that you would classify them as heavily used?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah. I guess that's a reasonable description.

Richard Dearnley -- Longport Partners -- Analyst

Right. And you said the EBITDA contribution was less than CAD1 million. What was the revenue contribution in the fourth quarter?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Well, we mentioned in the prepared remarks CAD24 million from the additional fleet as well as the Nuna, vast majority of that was the additional fleet. So, in the CAD20 million range and, as was mentioned profitability in those five weeks was very low given just the onboarding impact. We turned it over very quickly, but there of course, is going to be profitability impacts, when you bring on a fleet of that size. So, that's why such a low EBITDA margin in those five weeks.

Richard Dearnley -- Longport Partners -- Analyst

And run rate interest rate expense, as you stand on the ground now for '19?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Yeah. We've indicated in our comments around 5%, a little less than that in our IR deck on our website as well, you'll see it there that, that does have the benefit of 0% vendor financing in there, but as an enterprise we are under 5%.

Richard Dearnley -- Longport Partners -- Analyst

And it sounds like the maintenance facility needs expanding already? If with --

Martin Ferron -- Chief Executive Officer & Chairman

Well, we are certainly super-busy right now. So, it wouldn't be out of the question that will happen at some point. We've got a lot more assets now, when we decided to build a facility and the demand for external services is much, much higher, so it could be -- could be.

Richard Dearnley -- Longport Partners -- Analyst

Exciting, good. Thank you. Great year.

Martin Ferron -- Chief Executive Officer & Chairman

Thank you, Richard.

Operator

Your next question comes from Yuri Lynk with Canaccord Genuity. Your line is open.

Yuri Lynk -- Canaccord Genuity -- Analyst

Hey, Martin. Can we just go back on the CapEx for the year, I want to make sure, I got -- got written down here CAD90 million sustaining, which includes CAD20 million on the Aecon assets, is that right?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah, plus that is sustaining, but really it will drive EBITDA improvement in 2020 right, as we get more utilization of the assets. But for sake of argument, I still call it sustaining.

Yuri Lynk -- Canaccord Genuity -- Analyst

Okay. So, that would imply, you know, sustaining CapEx going forward would be less than CAD90 million, I guess?

Martin Ferron -- Chief Executive Officer & Chairman

Yeah.

Yuri Lynk -- Canaccord Genuity -- Analyst

Yeah. And I know you want to maintain some flexibility in especially to buy back shares and whatnot. But I mean what should I be modeling this year for growth -- growth CapEx?

Martin Ferron -- Chief Executive Officer & Chairman

I would say around CAD20 million -- another CAD20 million.

Yuri Lynk -- Canaccord Genuity -- Analyst

Okay. And then there was a quick mention about Nuna potentially having some of its results via an equity pick up. Can we just get some -- some details on that and how we should be modeling Nuna?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Yeah, I can take that one, Yuri. So, we picked up an interesting about 20 entities within the Nuna Group of Companies. And from a top-line perspective about 15% of those, we don't have a controlling interest in essentially, and therefore, need to be reported through that equity earnings line.

And we feel in Q1, when we have some -- some more substantive results from Nuna and the noise gone that would be able to walk people through, but the majority will come through just regularly proportionately consolidated. Our ownership stake shown in revenue and all of the line items, but a small portion you'll see come through equity earnings.

Yuri Lynk -- Canaccord Genuity -- Analyst

And do you envision grossing that small portion up to EBITDA, or it's still to be decided? I mean like -- when you report your adjusted EBITDA, would it be grossing that up?

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Yeah, we'll be looking to include that in adjusted EBITDA.

Yuri Lynk -- Canaccord Genuity -- Analyst

Okay. Just trying to make my modeling life easier.

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Yeah, I know.

Yuri Lynk -- Canaccord Genuity -- Analyst

Okay. That's it from me guys. Thanks.

Martin Ferron -- Chief Executive Officer & Chairman

Thanks a lot.

Operator

Your next question comes from Dan Primack with TPG Capital. Your line is open.

Dan Primack -- TPG Capital -- Analyst

Good morning, Martin.

Martin Ferron -- Chief Executive Officer & Chairman

Good morning, Dan.

Dan Primack -- TPG Capital -- Analyst

I'm looking forward to reading -- I'm looking forward to reading the letter. Do you a targeted goal for your ROE, or return on capital?

Martin Ferron -- Chief Executive Officer & Chairman

As high as possible. We benchmark it. As I mentioned ROE is going to be over 20%, if we hit our numbers. So, that's a pretty stout number right there. I like to get a return on capital up to the same level right. So, above 20% for both would be quite an achievement.

Dan Primack -- TPG Capital -- Analyst

Yeah, because that should drive your multiple as well. I mean you guys done a phenomenal job with your team. Most of my questions have been answered. But on the maintenance side, give a cost advantage over the dealer groups that are out in the region?

Martin Ferron -- Chief Executive Officer & Chairman

We believe we do especially with our shop here in Edmonton. The cost of doing business here is a lot less than in Fort McMurray, in a personnel costs are lower. So, yeah, I think we certainly do have an advantage.

Dan Primack -- TPG Capital -- Analyst

Okay, because the five-year payback on that slide seems kind of conservative then?

Martin Ferron -- Chief Executive Officer & Chairman

Well, we're always conservative there.

Dan Primack -- TPG Capital -- Analyst

Okay. Just a one I have -- oh just the slides in general, I mean it's the first time, I've seen them on a conference call, that's transformational as well. What was the debt reduction goal again by 2021?

Martin Ferron -- Chief Executive Officer & Chairman

CAD150 million.

Dan Primack -- TPG Capital -- Analyst

Okay, great. That's it. Looking forward to reading the shareholder letter. Thank you.

Martin Ferron -- Chief Executive Officer & Chairman

Thanks a lot, Dan.

Operator

There are no further questions queued up at this time. I'll turn the call back over to Mr. Ferron.

Martin Ferron -- Chief Executive Officer & Chairman

Okay. Thanks for joining us today. We look forward to talking to you again in the near future. All the best.

Operator

This concludes the North American Construction Group conference call. You may now disconnect.

Duration: 42 minutes


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Call participants:

David Brunetta -- Director, Investor Relations

Jason Veenstra -- Executive Vice President & Chief Financial Officer

Martin Ferron -- Chief Executive Officer & Chairman

Yuri Lynk -- Canaccord Genuity -- Analyst

Maxim Sytchev -- National Bank Financial, Inc. -- Analyst

Devin Schilling -- PI Financial Corp. -- Analyst

Ben Cherniavsky -- Raymond James -- Analyst

Richard Dearnley -- Longport Partners -- Analyst

Dan Primack -- TPG Capital -- Analyst

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