MONTREAL - WSP Global continued its years-long expansion this year, acquiring companies and securing contracts with an eye to the growing market for green projects.
Since late January, the engineering firm completed three more acquisitions in Australia, Switzerland and Quebec, adding 900-plus employees to the payroll — most of them at Swiss firm BG Consulting Engineers.
A fourth pending purchase of Australian engineering outfit Calibre will boost its headcount by another 800 and entrench WSP's prospects as a player in mine rehabilitation, said CEO Alexandre L'Heureux.
"It's built on the 2021 acquisition of Golder" — a 7,000-employee environmental consulting firm based in Toronto — "and aims to further position WSP as a leader in the mining industry's green transition in Australia and across the globe," L'Heureux told analysts on a conference call Thursday.
A global shift toward renewable energy over the next two decades will foster growing reliance on critical minerals as well as a push toward decarbonization in mining, boosting that sector's potential for WSP, he added.
The Montreal-based company is also part of a consortium selected last month to build the $4.9-billion first phase of Calgary's Green Line, a light-rail transit system comprising the largest infrastructure project in the city's history.
WSP has closed eight acquisition deals in the past 12 months — including the 6,000-strong environmental consulting business of U.K.-based John Wood Group — and more than 120 since 2006.
Despite the spate of purchases, the company's balance sheet "remains in good shape" with a leverage ratio of 1.8 times, said Sabahat Khan of RBC Dominion Securities in a note to investors.
Once a boutique firm called Genivar, the 64-year-old company has more than doubled its head count over the past decade, swelling to about 67,300 employees, including an additional 10,900 in 2022.
Last year, 59 per cent of the firm's annualized revenues derived from services "aligned with the United Nations' sustainable development goals," L'Heureux said. The UN adopted the aims, which range from clean water to clean energy and climate action, in 2015 as a call to protect the planet.
In its latest quarter, WSP boosted net earnings 18.4 per cent to $112.5 million from $95 million a year earlier. Revenues for the quarter ended April 1 rose nearly 29 per cent to $3.5 billion from $2.7 billion, driven partly by 8.6 per cent organic growth. And adjusted earnings per share of $1.37 topped analyst predictions of $1.32, according to financial data firm Refinitiv.
However, WSP's rosy financial outlook includes a couple clouds, according to one analyst.
"The quarter was definitely stronger than expected. But organic growth in the backlog was quite low. And you did maintain guidance, which does imply a slowdown in organic growth for the remainder of the year," Yuri Lynk of Canaccord Genuity told the chief executive.
L'Heureux replied that if two recent contracts, including the Green Line LRT, had been included in the quarterly results, the backlog within Canada would have reached double-digit growth rather than falling three per cent.
"So actually I'm not worried at this point at all ... It's more timing than anything," he said.
“We have (150,000) live projects at the moment, so you’ve got to look at the margin evolution over a longer period than 90 days," L'Heureux added, referring to the adjusted earnings margin of 15.5 per cent, which remained flat year over year.
The engineering outfit has projected revenue growth of 19 per cent this year to between $10 billion and $10.6 billion. It has also forecasted an 18 per cent jump in adjusted earnings.
"WSP appears set for continued growth from acquisitions and margin expansion driven by internal operational excellence initiatives, and is well-positioned to weather a potential recession given its diversified end markets exposure, including to the public sector and global mega-trends," said Laurentian Bank Securities analyst Jonathan Lamers in a note.
This report by Ïã¸ÛÁùºÏ²Ê¹ÒÅÆ×ÊÁÏ was first published May 11, 2023.
Companies in this story: (TSX:WSP)
