Welcome, ladies and gentlemen, to the Bird Construction First Quarter 2019 Financial Results Conference Call. We will begin with Mr. Ian Boyd's presentation, which will be followed by a question- and- answer session. At any time during the call today, you may press the star and one on your telephone to be placed into the question queue. You will hear a tone acknowledging your request. When we are ready for questions, you will be introduced into the conference in the order that you were received. If you wish to remove yourself from the question queue, you may press star and two. As a reminder, all participants are in listen-only mode and the conference is being recorded. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone.
Before commencing with the conference call, the company would like to remind those participating that certain statements which are made express management's expectations or estimates of future performance, thereby constitute forward-looking statements. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic, and competitive uncertainties and contingencies. In particular, management's formal comments and responses to any questions may include forward-looking statements. Therefore, the company cautions today's participants that such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual financial results, performance, or achievements of the company to be materially different from the company's estimated future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements are not guarantees of future performance.
The company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, events, or otherwise. At this time, I would like to turn the conference over to Mr. Ian Boyd, President and CEO of Bird Construction. Please go ahead, Mr. Boyd.
Thank you. Good morning, everyone. Thank you for participating in our first quarter 2019 conference call. Co-presenting with me today is Wayne Gingrich, our CFO. Financial results in the first quarter 2019 were impacted by several headwinds, resulting in a net loss of CAD 6.5 million, which is effectively the same from a year-over-year perspective. Revenue in the quarter was CAD 261.8 million and was CAD 32.6 million lower than in the same period in 2018, which is a contributor to the lower than anticipated results. Volume and gross profit were negatively impacted in the first quarter, in part due to harsher than expected winter conditions experienced in central Canada that impacted productivity and resulted in some of the work program commencing later than initially planned.
The first quarter results of 2019 were also impacted by a P3 project that incurred additional cost due to design-related scope growth and acceleration expense to meet the scheduled substantial completion date. There were substantial changes to the scope of the project requested by the client that are currently under commercial negotiation. The project is being executed by an office that was previously disclosed as having performance issues that have now been restructured. Adjusted EBITDA, which excludes CAD 1.9 million of severance costs partially attributable to the restructuring of the underperforming office, was a CAD 3.1 million loss in the first quarter of 2019 compared to a CAD 5.2 million loss in 2018.
Despite the challenges to start the year in 2019, we are encouraged by the growth of the amount of awarded but not yet contracted projects, many of which are in pre-construction and in a delivery model that supports a balance in the risk profile for our overall work program. Toward the end of the first quarter, the company successfully mobilized onto the Cedar Valley Lodge project and construction is proceeding as expected. Through the execution of our strategy, we believe the company will achieve a more balanced contribution from all sectors as we make progress reestablishing our earnings base. In 2019, the company secured CAD 248.9 million of new contract awards and change orders and executed CAD 261.8 million of construction revenues.
The new contract awards in the first quarter contributed to a backlog of CAD 1.3 billion for the company at March 31st, 2019, essentially flat with the backlog recorded at December 31st, 2018. Subsequent to quarter end, the East-West Connectors consortium achieved financial close and entered into a project agreement to design, build, and finance the Confederation Line Extension project in Ottawa, Ontario. The company, as a lead partner of the joint venture, will enter into the contract with the design builder to lead the construction of 16 light rail transit stations and one light maintenance and storage facility as part of the project. Due to the nature of the preferred subcontract arrangement between Bird and the design builder, the contract is not expected to be finalized and executed until 2020, following further advancement of the design, although Bird will begin working on the project immediately.
At yesterday's board of directors meeting, the board declared monthly eligible dividends of CAD 0.0325 per common share for May, June, and July of 2019. Wayne will now take us through the financial performance for the quarter compared with the prior year.
Three months ended March 31st, 2019, compared with three months ended March 31st, 2018. During the first quarter of 2019, the company recorded a net loss of CAD 6.5 million on construction revenue of CAD 261.8 million, compared with a net loss of CAD 6.4 million on CAD 294.4 million of construction revenue in 2018. The net loss in the first quarter of 2019 was in part driven by lower volumes in the work programs due to harsher than expected winter conditions experienced in central Canada that impacted productivity and resulted in some of the work program commencing later than initially planned. The company's 2019 first quarter gross profit of CAD 6.3 million was CAD 0.8 million, or 11.2% lower than the CAD 7.1 million recorded a year ago. The decrease in the amount of first quarter 2019 gross profit is driven by the lower quarterly construction revenues year-over-year.
The company's first quarter 2019 gross profit percentage of 2.4% was flat compared with the gross profit percentage recorded a year ago. In the first quarter of 2019, there was one P3 project that is being led by an office that was previously disclosed as having performance issues that incurred additional cost due to design-related scope growth and acceleration expense to meet the scheduled substantial completion date. There were substantial changes to the scope of the project requested by the client that are currently under commercial negotiation. Comparatively, the first quarter of 2018 was impacted by a P3 project that achieved substantial completion late in the first quarter of 2018. While the company incurred additional escalation costs and financing costs from lenders, the company was more significantly impacted by the adoption of IFRS 15, revenue from contracts with customers, and the change in treatment of variable consideration.
Commercial negotiations are ongoing related to that project. Income from equity accounted investments in the first quarter of 2019 was CAD 0.7 million compared with CAD 0.2 million in the same period of 2018. The income in the first quarter of 2019 was primarily driven by the margin from non-concession equity accounted entities. In the first quarter of 2019, general and administration expenses of CAD 15 million were CAD 0.6 million lower than the CAD 15.6 million in the comparable period a year ago. During the first quarter, the company had minimal third-party pursuit costs, which were CAD 1.4 million lower than the amount recorded in 2018. Offsetting this positive variance was a lower foreign exchange gain of CAD 0.4 million. Compensation expense was CAD 0.6 million higher than the amount recorded a year ago, primarily due to the CAD 1.9 million in severance costs incurred.
The severance cost was partially attributable to the restructuring of the previously identified underperforming office, which was in part offset by a gain recorded in the total return swap program, resulting from the increase in the company's share price. Finance income of CAD 0.6 million in the first quarter of 2019 was CAD 0.3 million higher than the CAD 0.3 million recorded in the same period of 2018. Finance and other costs of CAD 1.5 million were CAD 0.5 million higher than the CAD 0.9 million recorded in the first quarter of 2018. The increase was due to CAD 0.4 million higher loss year-over-year on the mark to market of interest rate swaps, which will reverse back to income through the life of the derivative tied to project completion. In addition, interest costs were higher associated with increased loans and borrowings and higher interest rates and interest costs recognized upon adoption of IFRS 16.
In the first quarter of 2019, income tax recovery was CAD 2.4 million, which is comparable to the first quarter of 2018. I will turn the call back over to Ian to comment on the outlook for the company in fiscal 2019.
Thanks, Wayne. At March 31st, 2019, the company had greater than CAD 225 million in projects that have been awarded or in which the company has been named as the primary negotiation proponent that are yet to be contracted. The most significant is the Advanced Nuclear Materials Research Centre for Canadian Nuclear Laboratories located in Chalk River, Ontario, a project expected to be contracted in the third quarter of 2019 following the completion of the validation phase. In addition, the company is in pre-construction phase for over CAD 200 million in institutional projects in British Columbia that are anticipated to proceed to construction by the third quarter of the year, although only a small fraction of that number will be included in backlog due to the agency nature of the construction management contract delivery model.
Company has a higher than normal level of pre-construction activities broadly ongoing that have yet to convert into contracts. While this strengthens the longer-term outlook, the opportunity cost impacts shorter-term results, primarily due to the allocation of key resources to projects that are not yet generating gross profits. Subsequent to quarter end, the East-West Connectors consortium achieved financial close and entered into the project agreement to design, build, and finance the Confederation Line extension project in Ottawa, Ontario. Due to the nature of the preferred subcontract arrangements between Bird and the design builder, the contract is not expected to be finalized and executed until 2020 following further advancement of the design. However, the company will immediately allocate resources to the project to support design development and work on pre-construction activities.
This project will increase the company's value of awarded but not contracted opportunities to approximately CAD 600 million as of May 7th, 2019. With respect to the P3 market, the pipeline of projects remains healthy with a mix of opportunities primarily comprised of larger scale transportation projects and relatively smaller scale environmental projects. As of March 31st, 2019, the company, in a preferred subcontract arrangement to a consortium, was in active pursuit of an LRT project that is expected to be submitted in the second quarter of 2019 and was shortlisted for two smaller environmental projects that are awaiting a request for proposals, although timing remains uncertain. The company also submitted responses for two requests for qualifications and was active in responding to one other. The award of any of these project opportunities will primarily benefit 2020 and beyond.
In terms of ongoing projects, the company experienced additional costs in the first quarter related to a challenging project in a previously disclosed underperforming office. There is risk that this project could experience additional margin erosion in the year, which could weigh on overall results. The project is scheduled to achieve substantial completion in 2019. Despite the setback, the company expects to have a work program in 2019 that is more balanced and diversified than it has been over the past several years, supporting progress towards higher levels of profitability and growth. Management expects to see work on the Cedar Valley Lodge to continue to ramp up through the second quarter and start to contribute to earnings, although meaningful contribution from this project will not happen until the third quarter when the project is at full production.
The company expects to see an improvement in earnings attributable to its higher margin self-perform industrial work program through the year and anticipates more broadly a double-digit year-over-year revenue growth in 2019. Due to the combination of timing of bids and generally the smaller scale of projects anticipated to be in active pursuit in 2019, the company expects third-party pursuit costs to return to more modest levels. Taking into consideration the company's first quarter results, the current backlog, and the pending conversions of awarded projects into backlog, the company expects to ramp up to its historical earnings in the range of CAD 25 million will be delayed into 2020. This concludes the prepared remarks section of the conference call. I'll now turn the call over to the conference call operator who will take your questions in turn.
We will now begin the question and answer session. Analysts and institutional investors who wish to ask a question may press star and one on their touch-tone telephones to join the question queue. You will hear a tone acknowledging your request. If you are using a speakerphone, please ensure you lift the handset before pressing any keys. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. Our first question comes from Michael Tupholme with TD Securities.
Good morning.
Morning, Michael.
Morning, Michael.
Are you able to provide any additional information in terms of trying to quantify the extent of the impact from the additional cost on the P3 project that had issues in the quarter?
No, I wouldn't want to quantify it as much to say as you can prioritize what were the impacts in the quarter. We've identified obviously the severance costs as being about CAD 1.9 million. That was an impact to the quarter. If you rank the three primary contributors to the performance in the quarter, you could say, the revenue side of things impacted by weather was the primary contributor to the quarter, with the project being secondary. The severance being, I guess, the third factor or significant factor or material factor that would've impacted our quarter. Just to give you a sense of it.
In terms of order of magnitude, we know the severance number you're saying in dollar terms at the EBITDA line, that is the lowest amount in terms of the contribution.
Yeah, if you look at the three factors, that is the lowest amount. Yeah.
Yeah.
Yeah.
Although you've excluded that from the adjusted number.
Correct. Yeah. In terms of talking, I was thinking more in terms of net income impact as opposed to the EBITDA impact. As you've noted, the adjusted EBITDA number that we've identified there is excluding the CAD 1.9 million in severance costs.
Okay. With regards to this P3 project that had issues, it sounds like you indicated that there's still some risk of potentially additional costs as you go through the year. Is there any way to try to frame that risk? Can you just talk about what stage the project is at, when it's supposed to be completed and I guess level of confidence that there won't be further issues versus an expectation that it's likely that there will be?
The actual project in and of itself is actually in a little bit of flux relative to schedule, although we're confident it will be done in 2019. Part of the uncertainty relative to schedule is simply that there is a significant scope change that's been introduced to the project by the client that we're still trying to work through from a commercial negotiation standpoint. Certainly it will be done, based on even incorporating that significant scope change within 2019 as we currently look at it. From that standpoint, the timing is more certain, in the sense that it definitely will be in this year. In terms of the overall, obviously we have done our cost forecasting associated with the project and believe we've made the proper provisions for what we have experienced to date.
The project is roughly in that 24-month timeframe. To give you some sense, it's going to finish in 2019, so it's been ongoing for a better part of a year or more. In terms of our ongoing execution, we'll give you some sense of where we're at with the stage of construction in terms of actual % complete. I would say that we've said that part of the issues that we're dealing with, in fact, a significant part is really design related and P3 is being design build. Ultimately what we're dealing with is these design related issues.
While we may have some recourse through errors and omissions and other ways that we can deal with some of the issues that we’ve encountered, that process will take a significant period of time based on our own experience, to be able to go through something like if you were to pursue errors and omissions insurance. Associated with that is, from an accounting standpoint, certainly the requirement in terms of certainty of recovery is a higher standard than normal. Ultimately it will be a time period. We haven’t made any recovery associated with any design or design issues. We’ve actually made the provisions to account for it, as we’ve currently constructed our financials on that project. If there was a benefit in the future, with errors and omissions or another methodology, it will be a timing difference more so than anything else.
That will be beyond 2019, again, based on our experience.
In your outlook, you’ve indicated that getting to the CAD 25 million of earnings amount that you had previously been targeting for 2019 will be delayed into 2020. Is that purely a function of the issues you encountered in Q1 that you’ve talked about, or has anything else changed with your outlook over the subsequent three quarters for 2019, Q2 through Q4?
I would say it is largely based on what has transpired in our first quarter versus what we anticipated to transpire. That is probably the most significant factor. I would say the other factor is just simply timing of our awarded but not contracted work program. Some of them we have a better sense of, so from an Advanced Nuclear Materials Research Centre, the project for CNL, we believe that it will be somewhere in the Q3 range. There’s no guarantee that it’s Q3. Could it slip to Q4 or something of that nature? That certainly has an impact. If you look at the pre-construction activities we’re doing for institutional projects in British Columbia, again, our anticipation is that by Q3, that we will be into construction for those projects.
Timing, it always comes into play with respect to those awarded but not yet contracted. The Confederation Line extension, we anticipate, just based on the way that we've structured that contract to be preferred subcontractor, not responsible for the design. We'll see that design develop over the course of 2019 and won't contract till 2020. That hasn't factored into our outlook, I guess, for the way that we've given our guidance. To answer your question, I think the two factors, with respect to the guidance is Q1 results versus what was anticipated timing. The second factor is the timing of awarded but not contracted coming into backlog and starting construction activities.
Okay. If we just, lastly for me, if you sort of build on all of that, I know you never previously provided 2020 guidance. If we're looking out to 2020, is there anything that's changed as far as the 2020 outlook? Everything you just talked about sounds like it's more of a 2019 issue and/or timing in 2019. Is that fair to say?
I think it's fair to say with respect to what my answer that I just gave you relative to how you look at our guidance that we provided and what are the factors that have, I'll call it, shifted our guidance to be towards 2020 versus 2019. I would say, if anything, our outlook with respect to 2020 probably strengthened with respect to the Confederation Line extension that appears to be in that zone where we're going to be able to contract that in 2020. You'll get some work done in 2020, although that schedule is certainly still being refined and certainly is a significant project.
When you look at it, I would say that we believe that we've worked very hard on project selection and trying to balance risk profile as well as trying to diversify our work program to ensure that we have contributions from all sectors. When you look at it, even from a Cedar Valley Lodge standpoint in our industrial work program, that's the largest capital project in Canadian history. As we ramp up there through 2019, that project will go through all of 2020 and finish in early 2021 based on the schedule. I see additional opportunities at LNG, as is natural when you're in early on one of those project sites, and that's been our experience. Again, we don't feel any different.
We feel as though we are building our work program to be very strong as we move forward with the right balance of risk reward in it. If anything, we're certainly feeling strong about the outlook. This is an unfortunate first quarter. In my mind, it tends to be more about timing of the way we've built our backlog to actually come to fruition here that's positive. That's the good news story in my mind.
Okay. Thank you.
Our next question comes from Maxim Sytchev with National Bank Financial. Please go ahead.
Hi. Good morning.
Good morning, Maxim.
Ian, I just wanted to follow up a little bit on the outlook on net income. Should we be interpreting that this is kind of a target for 2020 as the exit rate? Or you are pushing out the profitability target that you're aiming for three to six months out? I'm just trying to get the timing right in terms of what exactly you're telegraphing.
Yeah. The intention of the guideline was your latter explanation. Just pushing it out to three to six months, in terms of what we anticipate. Just to give you some timeline. If indeed you say Q1, and I'll call it set it aside from the standpoint of our guideline and believe that between Q2 and Q3, you start to see what we anticipated we would see when we gave that initial guidance. It's essentially moved out. If it's Q2, Q3, Q4, Q1 next year, or it's a Q3, Q4 2019 and Q1, Q2 2020, then ultimately that ramps up to that historical CAD 25 million range in terms of the earnings. From our standpoint is we're in a more consistent sort of zone and have worked ourselves through, I'll call it this underperforming office and restructuring.
Right. Okay. That's very helpful. The other question that I have is, I guess a bit more of a general kind of takeaway given what transpired over the last, let's call it 15 months. You always said there was a product mix where less industrial work, high margin. I mean, that negatively impacted you. Just from a performance perspective, Ian, can you maybe talk about the initiatives that you're implementing on risk mitigation, bidding practices, just to make sure that we have less these types of surprises on a go-forward basis, if it's possible?
Yeah. That's a good question. What have we done? We have, I think, made sure that we're paying significantly more attention to, I would say, risk profile and balanced risk profile. I would also say risk reward on our project selection. When we look at it. For instance, Confederation Line extension actually is a good example of this. We've arranged to be in a preferred subcontract arrangement, where we don't have responsibility for design, but we're part of a team, and we're going to bring our construction experience, and we're going to use our design development experience and pre-construction activities to be able to make that project successful for the overall consortium in our role.
We also have been very conscientious not to take joint several risk on a size of project in which we're going to be a minority partner in that, in the sense of just the work that we're going to do is going to be significantly less in terms of overall value than the overall project. We've avoided joint several risks by being preferred subcontractor. We've also, in that instance, not taken on design risk associated with it. You start to see a more balanced risk profile with respect to that type of project. That's a good example of what we're trying to do with our work program. If you look even in B.C., we're doing some more construction management.
Part of that's driven by the marketplace in and of itself, but part of that's driven by, all right, where are we seeing our opportunities and what's the risk balance that we want at any one given time of what we'd call higher risk work, which is obviously P3 being essentially the highest risk work we have, and then design build maybe a notch below that, and then you have stipulated some and then in the medium zone, and then you have construction management or cost plus in that lower risk. We're trying to pay more attention to the risk mix of our work program, and trying to make sure that not only do we have contribution, which to your point, our industrial work program has impacted in the last, call it 15 months.
It's probably more in the last 24 to 36 months in terms of new opportunities, for sure, that we haven't seen and seen that we would've seen in the past. That's a factor in our overall results. As we move forward, it's not just contributions from all those sectors, it's also the risk mix that we have in our work program. I would say on a go-forward basis, we've got a much different risk profile, so much more balanced, I would argue. That's been a big focus for us on a go-forward basis and trying to make sure that we are not only getting contributions and diversified contributions from all our work programs, but also what's the balance of risk in our overall work program and making sure that actually risk results in, I'll call it the reward profile that we want out of those projects.
That has been a work in progress really for the extension of our strategic plan that really kicked into place in 2017. We're seeing benefit of that. We've gone through a rough stretch here, we see how the hard work that we've done in the last 18 to 24 months is now paying off in a work program that is, I would say, achieving what we set out to achieve.
In terms of, you believe that there's enough of those types of contracts/arrangements that do meet your appropriate risk profile? I just want to make sure that-
Yes. I think there are. If you look at the LRT projects, in both instances were preferred subcontractor arrangements. From that standpoint, as we get more transportation resume, I think that's a viable strategy. I don't believe that, for instance, we need partnering in that transportation strategy, I don't believe partners are expecting necessarily the vertical contractor to necessarily have joint several risk when obviously their work program is much smaller in the overall scheme of those projects. I think that is a viable strategy. We'll pursue that strategy on a go-forward basis as it becomes available. We'll be selective in what we do. If you look at our P3 programs in the environmental side of things, the environmental projects tend to be a little bit smaller, I'll say, in terms of overall size.
That becomes more attractive in the sense that that is a manageable size project with a manageable size risk profile that we pursue in those. I think that that's certainly viable. We're going to be selective in our social infrastructure P3s. The reality is social infrastructure P3s have been a little less plentiful in terms of opportunities over the course of the last 12 months, part of that's just driven by changes in government. You have in B.C. that they've gone away from a P3 work program and more into a design build, even with that, they've obviously shifted priorities. That takes time to realize, okay, what is the new work program and the priorities of that government and how is that going to manifest itself in opportunities?
Same thing happened in Ontario, where the two primary, when you look at the two primary areas where we would have P3 opportunities, Ontario and British Columbia, both have experienced government changes, which then change priorities in Ontario to this point. Although I think we're now on expecting that we'll get priorities here very shortly from the Ontario government, we'll still be selective in terms of what we do with respect to that. If you look at our other parts of our business on the industrial side of things, we're seeing more and more opportunities on our nuclear in Ontario, and that's a manageable risk profile in the sense that we are starting outside the fence.
As we gain more experience and we understand those clients better, and as we enhance our team as we move forward, we'll continue to get additional opportunities that will present themselves, with either, an OPG or a Canadian Nuclear Laboratories or obviously Bruce Power, that we've already done a few projects and are still executing on a third project. When you look at it, we're going to continue to have that approach to our work program, and I think there are enough opportunities to have that as a sound strategy that will also result in, I'll call it, what we would normally see as more consistent results out of our organization.
Okay. That's helpful. Last question for Wayne, if I may. In terms of, typically we see the seasonality from a non-cash working capital perspective in Q1. Is there anything particular that we should be aware of for the remainder of the year, or should we expect a typical seasonal pattern on that front?
I'd expect a typical pattern. There's nothing unusual that's going to occur. Maybe the one thing that we will see is with a higher level of industrial work program, you may see more investment going into working capital. That would be a timing issue, and at this point, we're still expecting late Q3 and Q4 to be strong in terms of cash generation.
Okay. That's it for me. Thank you.
Thank you.
The next question comes from Frederic Bastien with Raymond James.
Good morning, guys. We were well into Q1 when you hosted your last conference call. I'm a bit surprised by the extent of the earnings disappointment. When did it become obvious that the weather and the scope changes would materially impact results?
Yeah, the scope change was actually fairly recently in terms of the overall scheme of the P3 project. That's a factor in it. One of the challenges with respect to design and design-related issues on these projects is that at any point in time, you can determine that you are either missing a design element or there needs to be design changes. That's a little bit harder to judge when those happen. From that standpoint, at the time that you become aware of it, then obviously you make the provision and you try to deal with the most efficient way to manage that design issue, whether that be something that was actually missed from the requirements or whether that was the design is actually not going to work as well as you thought it was going to in field when it actually comes to actually execution.
There's the design element. The P3 element is a little bit harder, certainly the scope change became more apparent through the course of first quarter in the sort of size and sort of impact that scope change may have. Again, we still have an ability to be able to obviously go through commercial negotiations on how that impacts the overall schedule. We'll continue to do that. When it comes to the weather, what we ran into, I would say, is actually sort of at the end of, I think it's more the end of February into the March timeframe, in which we anticipated that we wouldn't see quite the weather that we actually experienced. What happened was is that you ultimately had, particularly in central Canada, we had some of our more self-performed work operations ongoing.
We had significant periods of time in which we were working just not as productively, we certainly spending much more time on winter heat and winter conditions. I would say that was in the March timeframe, and I think the impact of it wasn't as appreciated at that point in time, certainly than perhaps, obviously that we expected. It got to the point where you had certain projects there where for self-performing scopes of work, we were literally rotating guys in on 15-minute shifts because it's so cold. You can imagine what that does to productivity and/or your ability to get something done.
In normal course, we might be in a position where we'd say, "Okay, we just don't work in those operations, and therefore we can actually delay and then come back when the weather is better." In this instance, we had scheduled completion dates that needed to be met, and we take those seriously with our clients. We did what we needed to do through that time period, and ultimately it ended up being higher expense associated with it. That was a large impact to us. There's other instances where we thought we were going to get started in work programs a little bit earlier in the year. Maybe that was optimistic thinking, but based on past experience, I would've said we would've got started more work in March. A good example of that is, for instance, OPP.
In OPP, which we have nine stations, we actually started one of those stations by design, and we get that ahead, so we don't have issues on the other eight stations. We kind of use that as the model to make sure that the design and construction and methodology is working the way we want, and then repeat for another eight. We didn't start eight of those, and we anticipated we would start eight of those in March and would have some productive days in March and revenue and cost generation through the course of March. That just didn't happen. We ended up pretty really starting that in April once we get a time period which made sense to us.
We actually avoided the winter cost of OPP through the course of the winter by design as we advanced our design, but just anticipated we'd get a chance to start it earlier than we actually did.
All right. That's helpful, Ian. Wayne, just wondering what the incremental depreciation and interest expenses you expect to incur as a result of IFRS 16 on an annual run rate. Do you have those numbers handy?
Yeah. On an annual basis, I'd expect it to be in the CAD 3 million range, maybe CAD 3 million-CAD 3.5 million on the high end.
Matching, I guess, interest expense and depreciation?
Interest expense would be lower. I think in Q1, we had it disclosed in one of our notes there, it was about CAD 220,000, and then the remainder would be depreciation.
Okay. All right. Thanks for that.
Thank you.
There are no further questions at this time. I will now hand the call back over to Mr. Boyd for closing remarks.
Thank you for participating in Bird Construction's 2019 first quarter conference call. As always, we are available if additional information is required, so please do not hesitate to get in touch with us. Have a good day.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.